1099-K

A new Internal Revenue Service (IRS) form, the 1099-K, will be required for the 2011 tax year.  This form will require third-party payment processors and settlement entities (i.e. Credit card companies, EBay and PayPal) to report gross payments made to payees through their service to the Internal Revenue Service.  A 1099-K will not have to be issued for small payees under 200 transactions and under $20,000 in total annually.  Form 1099-K will be due to payees by January 31, 2012.
The new form will list total payments processed for the payee by month.  In turn, the payees will then have to list on their individual or business returns their gross receipts from third-party process sources separately from other sales.  Taxpayers will need to track their sales separately on their accounting records to facilitate this required reporting change.  At the end of the year, the accounting records will need to be compared to 1099-K’s received to ensure totals are in agreement.  Make sure to forward all 1099-Ks received to your tax preparer for proper reporting on your applicable income tax returns.
If you have any questions about how this new form relates to your business and accounting records, please give us a call.