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What to Know About the 1099-K

What to Know About the 1099-K

IRS Form 1099-K is a form used by the Internal Revenue Service to report certain transactions to improve voluntary tax payments and compliance. The form originated in 2008 as part of the Housing Assistance Tax Act, even though the document has nothing to do with housing at all. A 1099-K is required for those who received payments:

If you are required to submit a 1099-K form to the IRS, you should receive a copy of it in the mail no later than January 31st of the following year. If you have not received one, but feel that you should have, it is imperative that you contact your credit card processor to see if they have prepared one for you. Keep reading to learn what to know about the 1099-K.

What Does Form 1099-K Report?

IRS Form 1099-K reports the gross amount of all payment transactions by an individual or business during a tax year. An individual or company will receive a report from each entity they received payments from in settlement of reportable payment transactions. The IRs defines a reportable payment transaction as “a payment card transaction or a third-party network transaction.” In addition, the IRS states that:

The gross amount of a reportable payment does not include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

IRS Scrutiny of Form 1099-K

When the IRS first began issuing the 1099-K form, reporting was not given much attention by the Service. In fact, another IRS form, Form 1049 included specific instructions for taxpayers to ignore amounts from the form. Recently, however, the 1099-K has been taken a much firmer stance and has begun regularly contacting taxpayers whose gross income is less than what is reported on the 1099-K form.

Since the IRS takes a much firmer stance on reporting of Form 1099-K, it is crucial that your business accounts and records reflect your business income accurately.  Report all income you receive from your business on your income tax return, whether it be cash, checks, or credit or debit card transactions.

According to the IRS, business income is “generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return.”

Contact an Experienced Tax Attorney Today

If you are facing penalties from the IRS, or if you were unsure which forms are required,  you need the help of an experienced tax law firm. At Ayar Law, we represent people and business with state and federal tax problems that require creative solutions. We focus entirely on tax problem resolutions and giving our clients a fresh start. We strive to get you the best solution for your situation. So, if you’re having tax troubles call Ayar Law today at (800) 571-7175 for free, no-obligation tax advice

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