Form 1099-K, Payment Card and Third Party Network Transactions, is an IRS information return used by financial institutions to report payments from payment card transactions (e.g., debit, credit or stored-value cards) and settlement of third-party payment network transactions. Several caveats:
- Third-party payment network transactions aren't required to be reported on Form 1099-K until after the gross payments exceeds $20,000 and the aggregate number of transactions exceeds 200.
- Only the gross payment is reported. Adjustments for credits, cash equivalents, discounts, fees, or refunds aren't included.
- The dollar amount of each transaction is determined on the date of the transaction.
Examples of when a taxpayer may receive a 1099-K:
Business: A business that accepts payments by debit or credit card will receive Form 1099-K from their card payment processor. These payments are generally included in gross receipts. In the tax return, they can be itemized separately from other sales (paid by cash or check, for example) for clarity.
Personal: If a platform like Venmo, PayPal, or Cash App is used to make child support payments, the receiver of the payments may receive a 1099-K issued from that platform. Child support payments are neither taxable to the receiver nor deductible by the payer, so the amount paid should not be reported on the tax return.
Reminder: The nature or reason for the payment directly correlates to whether or not and where to include the Form 1099-K in the income tax return.
Note: This article is intended to provide an overview of Form 1099-K. It is not intended as tax advice.