Insider Spot

Business Resource Center

Welcome to Sekure Merchant Services Business Resource Blog

All Posts

Form 1099-K: Best Practices for Small Businesses

Tax season will soon be upon us so we’re answering some common questions merchants have about the forms and acronyms you will come across when preparing taxes for your small business. For small business owners, tax season means filing Form 1099-K 

What Is Form 1099-K? 

Form 1099-KIn 2006, it was determined that Americans underpaid their taxes by a staggering $450 billion. To correct this, the 2008 Housing and Economic Recovery Act included new requirements for banks and credit card merchants to report payments to the IRS. This requirement is intended to increase tax compliance from independent contractors, freelancers, creators, and others contributing to the massive and growing gig economy. 

Form 1099-K, Payment Card and Third-Party Network Transactions was first issued in 2012 for reporting the 2011 tax yearThis form is intended as an information return used to report payments received through payment card transactions like debit, credit, or gift card transactions and through third-party payment networks like PayPal, Etsy, Shopify, Amazon Payments, and others.  

What Is the Difference Between Form 1099 K and Form 1099 MISC? 

Based on their names, it would be easy to assume that Form 1099-K and Form 1099-MISC are fairly similar. However, they serve two different purposes that are important to understand when you’re filing your taxes.  

One of the key differences between the two forms is who they are sent from. Form 1099 K is sent to you from a financial institution. Form 1099-MISC is sent to you from businesses for whom you have supplied more than $600.00 in freelance or contract work. Form 1099-K is specific to payments from card transactions. You will receive Form 1099-MISC from a business regardless of the form of payment tendered. 

Will I Receive Form 1099-K? 

According to the IRS, you will receive your Form 1099-K from each payment settlement entity from which you “received payments in settlement of reportable transactions.i 

This means that you will receive Form 1099-K prior to January 31st if: 

  • You accepted debit, credit, or pre-loaded stored value cards and/or
  • You received settlement of third-party network transaction above the minimum reporting threshold of
  • Gross payments over $20,000 AND
  • More than 200 transactions

 As if this isn’t complicated enough, state law may require businesses to report incomes over a certain amount which is different than the federally required amounts. Be sure to check your state requirements to make sure that you are reporting accurately. 

How Do I Report My Form 1099-K on my Tax Return? 

The amount from your 1099-K form makes up a portion of your business income (or gross receipts) which you’ll need when filing your income tax return. Your 1099-K form should also match your own records. To help you correctly report your gross receipts on your income tax form, the IRS recommends that you 

  • Confirm payment card receipts equal the amount listed on your 1099-K 
  • Ensure income tax filing reflects the amount of your annual gross receipts 
  • Confirm all income stemming from your payment transactions is reported 
  • Keep records which demonstrate income and deductions 

It might be helpful to remember that your payment processor sends the same information to you and the IRS, which includes: 

  • Monthly gross credit/debit card processing  
  • Legal business name 
  • Tax Identification Number (TIN) 
  • All sales of the current tax year between January 1st through December 31st  

What do I do if I did not receive a Form 1099-K? 

Even if you did not receive a Form 1099-K from the payment processing company, you are still responsible for filing and reporting that income with the IRS so it’s important to do your due diligence. 

If you didn’t receive a Form 1099-K, here are a few tips to help you. 

  • First, ensure you fulfilled the criteria to be receiving a 1099-K for the current tax year 
  • Once confirmed, contact the payment processor to confirm that one has been prepared 
  • If the processor did not prepare one, report your sales on Schedule Cof your Form 1040 and leave 1099-Kline blank  
  • If the processor did prepare one, confirm your business name and address matches what they have on file  
  • Report the income that should be included on the Form 1099-K 

What Happens If There Is A Mistake On My Form 1099-K? 

If you find any errors on your 1099-K, contact your payment processor to have the corrections made as soon as possible. Make sure to give specific details such as the tax year and include any supporting documentation in your request.  

If you use Payments Hub, you can e-mail 1099k@paymentshub.com or call 866-485-8999, ext. 1300. Be sure your request includes the tax year(s) involved in the request, as well as specific details explaining the concern with the 1099-K.

For more information, visit www.irs.gov/pub/irs-pdf/f1099k.pdf  

 
 


 

 

 

 

 

Kassaye Berhanu-MacDonald
Kassaye Berhanu-MacDonald
When she's not working at Sekure, Kassaye can be found chasing after her son in a Montreal parc and laughing at his never-ending stories about Halloween characters and flying sharks. Besides parenting a human, Kassaye is a plant parent and loves all things arts and culture.

Related Posts

Five Ways Travel Agents Can Help Clients Navigate Today’s Trends

Although the travel industry’s 2021 recovery continues, the Skift Recovery Index (which provides up-to-date performance measures of the industry across 22 countries) shows that travel is still languishing 35% below pre-pandemic levels. The recovery has also been uneven, varying between different geographical regions due to divergent travel restrictions, COVID-19 case counts, and vaccine rollouts and the relative strength of their domestic travel markets.

Pasco Golfland: Continuing A Family Legacy

Small businesses, especially family-run businesses are the cornerstone of American life. Here at Sekure, we love highlighting the family businesses we serve, one of them is Pasco Golfland. 

10 Easy Marketing Tips to Increase Your Black Friday Sales

Whether it’s standing outside in the rain and snow for hours, cramming into stores or shopping from their beds in the wee hours of the morning to shop online, customers are always on the lookout for the best deal. Experts suggest Black Friday’s retail outlook will be different this year with fewer product selection due to hampered global supply chains, but retailers and other businesses can still make the most of this long weekend. To do so, you’ll need to find a strategy to help attract and delight your customers. Since Sekure works with a wide-range of businesses, we prepared a list of 10 marketing tips to help you grow your business for holiday shopping 2021, no matter the industry.