What is tax form 1099-K?
Payments made with a credit card or payment card and certain other types of payment,
including third party network transactions, must be reported on Form 1099-K by the
payment settlement entity (PSE) under section 6050W and are not to be reported on
1099 Misc form. In simple words, a 1099-K form is used to report income that you
received from credit cards, debit cards, or other electronic payments, such as eBay
and Pay Pal. Businesses that will see their income reported on form 1099-K are those
with more than 200 credit card transactions and more than $20,000 gross income from credit card sales.
Who is supposed to file form 1099-K?
Every payment settlement entity which in any calendar year makes one or more payments,
or any party which submits instructions to transfer funds to the account of a participating
merchant, in settlement of reportable payment transactions, must file informational
return form 1099-K with respect to each participating payee for that calendar year.
Exceptions to form 1099-K:
The following transactions are non-reportable on form 1099-K
- A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder's account
- A check issued in connection with a payment card that is accepted by a merchant or other payee.
- Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
Instructions to efile form 1099-K:
Filer's name, address, telephone number, and federal identification number boxes
Enter your name, address (including street address, city, state, and ZIP code)
and telephone number in the box in the upper left corner. The telephone number must allow
a payee to reach a person knowledgeable about the payments reported on the form.
Enter your federal identification number in the top box immediately to the right.
Filer check boxes
Check the first (top) box in the section immediately below the FILER'S name,
street address, city, state, ZIP code, and telephone number box if you are a PSE.
Check the second box (bottom) if you are an EPF or TPP.
If you are an EPF or TPP, enter the PSE's name and telephone
number in the box above the account number box at the bottom left of the form.
The telephone number must allow a payee to reach a person knowledgeable about
the payments reported on the form.
The account number is required if you have multiple accounts for a
recipient for whom you are filing more than one Form 1099-K.
Additionally, the IRS encourages you to designate an account
number for all Forms 1099-K that you file.
Box 1. Gross amount of merchant card/third party network payments
Enter in box 1 the gross amount of the total reportable merchant card/third party
network payment transactions for the calendar year. Gross amount means the
total dollar amount of total reportable payment transactions for each participating
payee without regard to any adjustments for credits, cash equivalents, discount
amounts, fees, refunded amounts or any other amounts.
The dollar amount of each transaction is determined on the date of the transaction.
Box 2. Merchant category code
Enter the 4-digit merchant category code (MCC) used by the payment card
industry to classify the payee for the merchant card payments reported
on this Form 1099-K. If you use an industry classification system other
than, or in addition to, MCCs, assign to each payee an MCC that
most closely corresponds to the description of the payee's business.
TPSOs do not use MCCs to classify payees and should not complete this box.
If a merchant has receipts classified under more than one MCC, you may either:
- File separate Forms 1099-K reporting the gross receipts for each MCC, or
- File a single Form 1099-K reporting total gross receipts and the MCC which corresponds to the largest portion of the total gross receipts.
Box 3 and 4
Boxes 5a through 5l
Enter in the appropriate box the gross amount of the total reportable payment transactions for each month of the calendar year.