The IRS Adds Another Reporting Requirement: Form 1099-K

 

New for 2011, the government has added an information return in an effort to capture more unreported income by businesses.

Form 1099-K, “Merchant Card and Third-Party Network Payments,” is required to be filed by banks and online sellers, also referred to as “Payment Settlement Entities (PSEs).” Merchant cards include, but are not limited to, Visa and MasterCard. Third-party networks include, but are not limited to, PayPal and Google Checkout. The form must be sent to the IRS and payee.

Institutions must report the gross amount of credit and debit card payments received by merchants only if 1) the aggregate amount of transactions exceeds $20,000, and 2) the aggregate number of transactions exceed 200.

Here are some additional details:

• The gross amount without regard to adjustments for credits, cash equivalents, discounts, fees and refunded amounts is reported in Box 1.
• The receipts are broken down and reported on a monthly basis.
• To avoid double counting the income, the payments should not also be included on Form 1099-MISC.
• The following tax forms have been revised to show Form 1099-K payments received: Schedules C, E, F (Form 1040) and Forms 1120, 1120S, 1065. However, for Tax Year 2011 only because of transitional issues, the IRS has changed these forms so that taxpayers are instructed to enter zero on the line for income from “merchant card and third party payments” (Form 1099-K). Instead, the income is to be included on the next line, “gross receipts or sales not entered on the previous line.”

For more information, contact the IRS.


Reprinted from Intuit's "From the Experts" article dated 12/7/2011

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Retirement Plan Options for Small Business

Employer sponsored retirement plans provide tremendous value to business owners offering a convenient method to save for retirement and are an important part of a comprehensive benefits package to attract quality employees all while providing important tax benefits.   There are several retirement plan options available to suit all businesses from the single-person sole-proprietor or the larger small business owner.   The chart below outlines the key feature of some of the more popular small business plans:

SEP-IRA SIMPLE-IRA Self-Employed 401(k) Eligibility Any self-employed individual or business owner with employees Businesses with 100 or fewer eligible employees who do not currently maintain any other retirement plan Any self-employed individual or business owner with no employees other than a spouse. Key Advantage Easy to set up and maintain Salary reduction plan with less administration Generous contribution limits Funding Responsibility Employer contributions only Funded by employee salary reduction contributions and employer contributions Funded by employee salary reduction contributions and employer contributions Annual Contribution per Participant Up to 25% of compensation. Employee: Up to 100% of compensation, Employer: Either match employee contributions dollar for dollar up to 3% of compensation Or contribute 2% of each eligible employee's compensation Employee: Up to 100% of compensation.Employees age 50 or older can make additional catch-up contributions . Employer: Up to 25% of compensation,       Access to Assets Withdrawals at any time. Withdrawals are subject to current federal income taxes and a possible 10% penalty (if the participant is under age 59½) Withdrawals at any time. If employee is under age 59½, withdrawals generally may be subject to a 25% penalty if taken within the first two years of beginning participation and a possible 10% penalty if taken after that time period. Cannot take withdrawals from plan until a "trigger event" occurs. Vesting of Contributions Immediate Employee and employer contributions vested 100% immediately Employee and employer contributions vested 100% immediately Administrative Responsibilities No employer tax filings No employer tax filings Annual Form 5500 filing