If you process lots of debit or credit card payments, you might receive a copy of 1099-K in the mail from your payment settlement company (Stripe, PayPal, Amazon Payments, etc.)
If you got one, it means the IRS got one too, and it means your payment processor has started reporting your card payments to the IRS.
Payment settlement companies have to file Form 1099-K (and send you a copy) by January 31st if you received:
- gross card payments that exceeded $20,000 over the last calendar year, and
- more than 200 payment card transactions
You won’t receive a 1099-K if both aren’t true.
What is 1099-K used for?
1099-K is mainly used for tax compliance.
It lets you make sure that the numbers on 1099-K match the business income you’re reporting on your Schedule C. And it lets the IRS check this for themselves as well.
If you’ve ever wondered why your payment processor asked you for a Taxpayer Identification Number (TIN) when you first signed up for their service, this is why.
What does it look like?
Form 1099-K is a 1-page long IRS tax form with five copies: Copy A, Copy 1, Copy B, Copy 2 and Copy C. Copy A looks like this:
You don’t have to fill out or file 1099-K—your payment processor does. (In some cases, however, your state might require you to include Copy 2 with your state tax return.)
What is 1099-K income?
This is any credit card, debit card or stored value (e.g. gift card) card income your business earns that is processed by a payment processor like PayPal, Stripe or Square. (The IRS will sometimes also refer to these as “third-party settlement organizations” or “third party payment networks.”)
For example: if you run a successful Etsy store and only accept credit card as a form of payment, that’s probably reportable 1099-K income.
Is the $20,000 figure based on net or gross revenue?
The $20,000 figure is for gross receipts, not net receipts. The filer must send the IRS the total amount of payment card income it processed for you for the entire year, not adjusted for fees, refunds or rebates.
For example: if your total third party network payments for 2019 were $22,000, but you ended up paying back $8,000 in refunds that year, your processor will still send a 1099-K to the IRS.
What if I only exceed one of the two thresholds?
Your payment processor won’t send a 1099-K to the IRS unless you exceed both reporting requirements: $20,000 in gross payment volume and 200 transactions.
But even if they don’t have to send one to the IRS, they might have to send one to your state, depending on your state’s tax laws.
In Vermont and Massachusetts, for example, payment processors must send a 1099-K to the state for businesses reporting just $600 USD or more in total gross volume.
Where can I find my 1099-K?
If your payment processor filed a 1099-K this year and you didn’t get one in the mail by January 31st, you might be able to find a PDF copy on that processor’s website. Here’s where the most popular payment processors keep your 1099-K information:
Go to your PayPal dashboard, click on ‘Activity,’ then ‘Statements,’ then ‘Tax documents.’ Select the tax year for the 1099-K in question—a 1099-K should show up if PayPal prepared one for you for that tax year.
Stripe lets you export your 1099-K forms from the Documents section of your Stripe Dashboard.
You can download your 1099-K from the Tax Forms section of your Square Dashboard.
In the Shopify admin section, navigate to ‘Settings,’ then ‘Payment providers.’ In the Shopify Payments section, click ‘View payouts,’ then ‘Documents.’ Your 1099-K should be available for download in PDF form.
Go to your ‘Seller Central Account,’ click on ‘Reports,’ then ‘Tax Document Library,’ then select the tax year you want a 1099-K for.