Are you a self-employed individual or run a business owing more transactions during the year? Then, you need to understand form 1099-K and its particulars.
What is form 1099-K?
The IRS mandates taxpayers to report about various transactions from different sources, neglecting paid checks. Taxpayers receiving payment transactions report to the IRS through the 1099-K form. Either you’re an independent contractor or self-employed, you file 1099-K income with schedule C, with Form 1040 tax return.
The third-party network transactions are entities present between the buyer and seller. Settlement of a transaction happens by third parties. An example of third-party network transactions is online transactions. These third-party networks must report to the IRS with form 1099-k regarding their income that increases after a threshold level.
Who must file 1099-K?
Online sellers marketing in large volumes are ones to file Form 1099-K. The form 1099-K is obtained by February if you gained payments through card transactions in the preceding year with nearly 200 transactions and a gross amount of $ 20,000 or more. Payment card transactions are transactions complete through card and received as payment.
Many eBay customers indeed utilize PayPal for transactions. The above said is a PSE and needs form 1099-K. It is the responsibility of PayPal to let business customers know about sales transactions of service through 1099-K. Businesses receive a 1099-K.
Reading form 1099-K
It is essential for the business income stated on the tax return matches with the 1099-K form. If not, the IRS sends a notice to the merchant. Hence, inspecting the merchant statements and payment card receipt records helps you confirm the exact amount. To know if the gross receipts are accurate, reviewing the records helps. It is mandatory to check if you have reported all income such as cash, credit, debit, check, and store-value cards.
There are few vital details to check-in form 1099-k before submitting.
- If the taxpayer identification number (TIN) is correct?
- Is the business appropriately described with merchant category code?
- Are the numbers of transactions for payment right?
- Are the third-party payment transactions or card payment transactions correct?
- Is the form yours? If so, contact PSE for further details.
Additional points to remember
- People who sold or bought business during the year must include payments before procurement or later selling the business.
- People share credit card terminals with other businesses or people. The 1099-K should include card payment transactions of the individuals sharing your terminal.
- In case there are changes in your business, such as switching from sole proprietor to partnership or others with the same card terminal. Then, form 1099-K may not match your new business.
For reporting business income of tax return, Form 1099-K is crucial. Make yourself comfortable for e-filing form 1099-K online through the tax2efile.com portal. The portal navigates you in a user-friendly manner for filing your business tax returns. In case of queries, the customer helpline is always at service. Log in and e- file your form 1099-K stress-free.