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Category: Tax Questions

Form 1099-K - Merchant Card and Third Party Network Payments

The IRS states this about Form 1099-K...
"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."
What Does This Mean?
Form 1099-K is a form/statement created with the expanded IRS efforts to ensure that small business owners declare all of the revenue that receive annually (merchant processing accounts, online selling accounts such as PayPal, Etsy, etc.).  The income reported on Form 1099-K is not meant to replace the income accounting method for small businesses, but in addition to, you still have to report the rest of your income that was paid by cash, checks, etc.  In order to be issued a Form 1099-K, you will have to have participated in at least 200 transactions amounting in at least $20,000 over the course of the year.  The form is meant to enforce income reporting among those who are doing decent business, and who may not be reporting it.

Where Do I Include Form 1099-K On A Tax Return?
Input of the income reported on Form 1099-K will vary depending on the forms used to file the individual or business return.  If you are filing a Schedule C, include any income reported on Form 1099-K inthe total gross receipts.  If you are a filing a Schedule E, include any income reported on Form 1099-K in the rental income on Schedule E.  If you are filing Schedule F, include any income from Form1099-K in the farm income on Schedule F.

NOTE: The amount reported on Form 1099-K will not include charge backs or returns.  These items must be tracked separately and reported under 'Returns and Allowances' on the tax return.  This is a guide on entering Form 1099-K into the TaxSlayer Pro program.  This is not intended as tax advice.  For additional information refer to the Additional Links below.

Additional links:
Form 1099-K, Instructions for Payee
Instructions for Form 1099-K, Payment Card and Third Party Network Transactions
Understanding Your Form 1099-K
1099-K Reporting Requirements for Payment Settlement Entities
Third Party Reporting Information Center

Last Updated: 4/30/2018

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