The IRS states this about Form 1099-K...
"A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction."
What Does This Mean?
Form 1099-K is a form/statement created with the expanded IRS efforts to ensure that small business owners declare all of the revenue that receive annually (merchant processing accounts, online selling accounts such as PayPal, Etsy, etc.). The income reported on Form 1099-K is not meant to replace the income accounting method for small businesses, but in addition to, you still have to report the rest of your income that was paid by cash, checks, etc. In order to be issued a Form 1099-K, you will have to have participated in at least 200 transactions amounting in at least $20,000 over the course of the year. The form is meant to enforce income reporting among those who are doing decent business, and who may not be reporting it.
Where Do I Include Form 1099-K On A Tax Return?
Input of the income reported on Form 1099-K will vary depending on the forms used to file the individual or business return. If you are filing a Schedule C, include any income reported on Form 1099-K in the total gross receipts. If you are a filing a Schedule E, include any income reported on Form 1099-K in the rental income on Schedule E. If you are filing Schedule F, include any income from Form 1099-K in the farm income on Schedule F.
The most common place where a Form 1099-K will be entered is on a Schedule C where it becomes part as part of gross receipts (Schedule C, Line 1). In many situations, the income reported on a Form 1099-K will only represents a portion of the income received for the business, or the business will receive multiple 1099-K's when the business receives electronic payments from different merchant processing accounts.
To enter one or more Form 1099-K on the Schedule C in the program :
- Select Income
- Select Gross Receipts or Sales
- Select F10 to Create Supporting Notes. Next select 'NEW', and enter a description (such as "1099-K from Name of Merchant" or "Cash Sales") and the amount of the income.
Repeat this step for each 1099-K that represents income for this business which is part of Gross Receipts or for any cash sales.
The amount reported on Form 1099-K will not include charge backs or returns. These items must be tracked separately and reported under Returns and Allowances on the Schedule C.
NOTE:This is a guide on entering Form 1099-K into the TaxSlayer Program. This is not intended as tax advice. For additional information refer to the Additional Resources below.