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
