For tax years beginning after December 31, 2010, companies who accept credit or debit cards in the course of business will be issued a Form 1099-K: Merchant Card and Third Party Network Payments from their third-party service provider. This form will report the gross amount of payment transactions processed for the calendar year, as well as a breakdown of amounts paid per month. However, companies will only receive a Form 1099-K if both of the following requirements are satisfied:
- The aggregate amount of reportable transactions exceeds $20,000
- The number of transactions exceeds 200
Updated Federal business income tax returns, which have not yet been issued by the IRS, will have separate reporting lines for sales reported on Form 1099-K and sales not reported on Form 1099-K.
However, Form 1099-K will only report the gross amount paid to the taxpayer with no adjustments for fees, charge-backs, returns, or sales tax. As a result, companies who receive this form may have difficultly reconciling their records with that of the reporting service provider. To minimize the discrepancies and frustration associated with these new reporting requirements, companies should maintain adequate documentation of sales made by credit cards or third-party providers, such as PayPal.
Please contact us if you would like more details about Form 1099-K.
