If you accept credit card or PayPal payments in your business, be on the lookout for another tax form!
Due to the increased use of credit cards and electronic payments to vendors, the IRS is making a stronger effort towards mandating the reporting of income received through merchant cards and third-party payments (such as PayPal). If you receive payments from customers through merchant cards, or conduct more than 200 transactions and have more than $20,000 of gross income transacted through a third-party payment provider, you will receive a new form for next year’s tax return. Form 1099-K, Merchant Card and Third Party Network Payments, are prepared by credit card and third party payment companies and will provide the IRS with the gross amount of merchant card/third party payments received by a vendor. These payments are required to be separately stated under the gross receipts section of the 2012 tax return.
Some 1099-Ks were issued to business owners in 2011, but the IRS did not require the separate reporting on the 2011 tax return. The IRS will require that all eligible recipients separately state these gross receipts on their 2012 tax returns.
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Written by Jennifer Schiavone, CPA LinkedIn Profile