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Form 1099-K: Why You Need It and Where to Find It

This article is Tax Professional approved Group

If your small business processes lots of debit or credit card payments, you will receive a copy of 1099-K in the mail from your payment settlement entity (Stripe, PayPal, Amazon Payments, etc.).

If you got one, it means the IRS did too, and it means your payment settlement entity (a fancy way of saying payment processor) has started reporting your card payments to the IRS.

Payment settlement entities (PSEs) 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.

As part of the American Rescue Plan Act of 2021, these conditions are changing. Starting in 2022, the reporting threshold for 1099-K forms will be when gross card payments exceed $600.

What is 1099-K used for?

Form 1099-K is what’s called an informational return. It isn’t used to file your taxes—instead, it provides information to either complete your tax return or confirm the information reported.

Form 1099-K includes the gross amount of all reportable payment transactions made through your payment settlement entity.

It is mainly used for tax compliance. By ensuring that the numbers on 1099-K match the business income you’re reporting on your Schedule C, the IRS can confirm you’re accurately reporting your business activity on your income tax return.

Payment processors ask payees for a Taxpayer Identification Number (TIN) when they first sign up for the service so they can provide you with 1099-K forms at year end.

What does it look like?

Form 1099-K (or Payment Card and Third Party Network Transactions) 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:

2021 Form 1099K

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?

1099-K income is any credit card, debit card, or stored value card (e.g., gift card) income your business earns that is processed by a payment settlement entity like PayPal, Stripe, or Square. These are sometimes also referred to as “third-party settlement organizations,” “TPSOs,” or “third-party payment networks.”

For example: if you run a memorabilia reselling store on eBay and only accept credit cards as a form of payment, that’s probably reportable 1099-K income.

If you have concerns about how 1099-K forms may affect your business, it’s best to talk to a tax professional (or the in-house tax team at Bench). They can help you understand whether you are earning 1099-K income and how it may affect your tax filing.

How Bench can help

If you’re self-employed or run a small business, you receive enough tax forms to build the largest fleet of paper airplanes. At least, that’s probably what you’d rather do with them than file your taxes.

With Bench, tax filing is smoother than a paper airplane could ever fly. Once you connect your bank, credit card, and merchant accounts, we’ll automate your monthly financial reporting so you don’t have to lift a finger. Plus, you’ll gain access to a personal team of bookkeepers whose expert support can help you navigate tax season with ease.

Want to offload tax filing altogether? By upgrading to a premium subscription, you’re connected with our in-house tax professionals who can handle all things tax for you, including prep and filing. You even get access to unlimited, on-demand consultations to discuss all aspects of your business financials, including tactics to minimize your tax bill. Make researching tax forms a thing of the past with Bench. Learn more.

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 2021 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.

As a reminder, the reporting threshold will be reduced to $600 starting in 2022. It will still apply to the gross amount, not net.

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.

For example, in both Vermont and Massachusetts, payment processors must send a 1099-K to the state for businesses reporting just $600 or more in total gross volume.

In 2022, only one threshold will have to be met. If your gross receipts exceed $600, both you and the IRS will be receiving a Form 1099-K.

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:

PayPal

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

Stripe lets you export your 1099-K forms from the Documents section of your Stripe Dashboard.

Square

You can download your 1099-K from the Tax Forms section of your Square Dashboard.

Shopify

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.

Amazon Payments

Go to your ‘Seller Central Account,’ click on ‘Reports,’ then ‘Tax Document Library,’ then select the tax year you want a 1099-K for.

Further reading: Bookkeeping for Amazon Sellers

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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