1099-K Tax Reporting
“A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.” Per IRS website.
In other words, starting tax year 2011, all merchants that transact business through credit card, debit card, paypal, ebay, etc are required by the IRS to report gross income transacted to merchant account holder via form 1099K. The forms are required to be mail out by January 31.
Instructions for Payee:
You have received this form because you have
accepted merchant cards for payments, or because you
received payments through a third party network that (1)
exceeded $20,000 in gross total reportable payment
transactions and (2) the total number of those
transactions exceeded 200 for the calendar year.
Merchant card and third party network payers, as
payment settlement entities (PSE), must report the
proceeds of payment card and third party network
transactions made to you on Form 1099-K under
Internal Revenue Code section 6050W. The PSE may
have contracted with an electronic payment facilitator
(EPF) or other third party payer (TPP) to make payments
Update: The reporting requirement has been push back to 2013 for tax year 2012. There are still many problem and delay in reporting and receiving the form. Nonetheless, all businesses should be aware and correctly report all income received from the 1099K.
A notes to all merchant, make sure your TIN are correctly listed with your merchant provider. Reporting to the wrong TIN could create many unnecessary audit from the IRS since they now have the same information.