By Maria Valdez Haubrich
Will your business be affected by the new 1099-K form the IRS is rolling out this year? Business Finance reports that businesses accepting payments by credit card, debit card, gift card or online payment options such as PayPal, you could be getting 1099-K forms in the mail.
The form or forms will be sent to you payment settlement entities such as banks if gross payments to your business by that entity in 2011 totaled 1) more than $20,000 and 2) more than 200 transactions. Payment settlement entities report the information to the IRS as well; the forms are due to small businesses by today, January 31.
The new reporting requirement was created as part of the Housing Assistance Tax Act of 2008 and is intended to make sure that merchants accurately report their income from credit and other payment cards. The goal is to increase compliance in reporting income among merchants, and over 10 years, the new requirement is expected to raise more than $9.5 billion in taxes on income that would otherwise have gone unreported or underreported.
Business Finance says the 1099-K forms will include contact information on both the entity filing the tax return and the payee; the gross amount of merchant card or third-party network payments the payee received in 2011, detailed by month. If your company gets a 1099-K, you must report the amounts on your business taxes.
If you sell products and services, you might get a 1099-K and a 1099-MISC reporting the sale of the same service, Business Finance notes. If so, you will have to contact the entity that issued the forms and ask them to correct the error, or they will be reporting your income twice to the IRS.
You can find detailed explanations about 1099-K forms and information on how to report the income on your tax forms at the IRS website.
Image Courtesy Karen Axelton