Know About 1099-K Form
If you are a business owner or an online retailer who accepts payments via credit cards. You must familiarise yourself with the 1099-K forms. If you do not account for these 1099-K form correctly then you will end up paying either too much or too little tax.
In this article, we are going to help you to know more about these 1099-K forms in detail. Let’s get started.
What Is The Actual Purpose Of the 1099-K ?
The 1099-K IRS form came along with the Housing Assistance Tax Act of 2008. However, interestingly enough, it doesn’t have anything to do with housing. The real purpose of the 1099-K is to make sure all business owners and online retailers who accept credit cards correctly report their sales figures for tax purposes to the IRS. Therefore, at the end of the year, when you receive one of these forms. You need to mention all your sales transactions that you have made with each credit card processor such as MasterCard, Visa, and so on.
Who Is Eligible To Get A 1099-K ?
You are eligible to get a 1099-K form if you are a business owner or an online retailer who accepts credit cards from customers. Also, your annual processing activity needs to meet the following guidelines mentioned below.
- If the volume of transactions you made via third party processors is over $20,000 while the number of individual transactions you made is over 200.
- If the volume of sales has been over $600 in limited instances.
Upon meeting these criteria, you will be receiving a 1099-K form in the mail latest by 31st January of the following year. Now, there can be times when you didn’t end up receiving this form even though you are eligible. In those circumstances, you should make it a point to contact the processor and enquire about it. You should find out if they have prepared a 1099-K for you or not. If they respond saying no, then you can go ahead and report your sales information on the Schedule C of the 1040 return. Also, don’t forget to leave blank the 1099-K line if you are opting for this option.
Difference Between 1099-K and 1099-MISC
Before the 1099-K form came into existence with the entire 2008 Housing Assistance Tax Act, businesses generally used 1099-MISC. This form was required to be given by business owners and online retailers to their supplies; in case they did $600 and upwards worth of business together annually. Now, if the transactions took place via credit cards or via third-party processors; then them being reported on both the 1099-K and 1099-MISC forms is very much possible.
This is why, the IRS, to remove the possibility of double taxation, has directed that all 1099-MISC payments reported on the 1099-K form should now be reported only on the latter. The 1099-MISC need not be produced any longer. However, as this is still not very clear to all the businesses, companies keep on providing 1099-MISC forms as well.
