Miami Accountants Explains How to Cope with New 1099-K Notices
Form 1099-K “Payment Card and Third Party Network Transactions” is used to report payments received through reportable payment card transactions
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 is the purpose of Form 1099 K? This form endeavors to ensure that all online retailers are reporting sales for tax purposes. It requires credit card companies, such as MasterCard and Visa, and third-party processors, such as PayPal and Amazon, to report the payment transactions they process on behalf of retailers.
Whether the payee (vendor or contractor) receives a Form 1099-K or not, they are still required to report that income to the IRS and pay taxes accordingly. For current year payments, 1099-Ks must be sent to recipients by January 31, of the following year. Copies of each 1099 issued must be sent to the IRS.
What is the difference between 1099 and Form 1099-K? Form 1099-MISC reports income from a particular business, regardless of the form of payment. Form 1099-K reports bank card income from all your customers and clients. Both forms report taxable income to the recipient. Most individuals’ Form 1099-K reports payments to their trade or business.