As the internet economy grows, business entities find tax regulations increasingly complex, which impends growth and thus hinders business entry into new markets. Online payments made it easy for businesses to manage payment details and accept transactions without visiting banks and even without adding customer accounts. This tax payment makes it easy for businesses to calculate and collect the correct relevant taxes without having to understand the complexities of tax regulations or rates.

Got Form 1099-K from Your Payment Processor_Blog

To facilitate  2022 tax filing in such transactions, IRS has instructed the payment processors like Venmo and Cash App to send the Form  1099-K to users who accept money for selling goods & services. It includes those who transact in cryptocurrency using these payment processors. In summary, 1099-K is an IRS instruction form to be filed by the payment processing companies and shared with users so taxpayers can verify and include it in their income tax filing. Form 1099-K will report the total gross income in Box 1a received during the year without considering any adjustments, discounts, or refunds.

Did You Get The Form 1099-K?

Not all the users who make transactions through these platforms will be receiving the form. IRS defines a few eligibility criteria. If you received payments in the prior calendar year, then in such a case you should have received Form 1099-K, and here is the summary.

  • From payment card transactions (e.g. debit, credit, or stored-value cards), and/or
  • In settlement of third-party payment network transactions above the minimum reporting thresholds as follows:
    • For returns for calendar years prior to 2022:
      • Gross payments that exceed $20,000, AND
      • More than 200 such transactions
    • For returns for calendar years after 2021:
      • Gross payments that exceed $600, AND
      • Any number of transactions

If you are using multiple payment processors, each company will be sending a separate Form 1099-K. This form will include all transaction details including taxable non-taxable payments. Non-taxable transactions can be money received from friends, share for home rent from roommates or as gifts, and more.

How will I Receive My 1099-K Tax Forms?

Qualified users will be notified in the app and send an email to the address on file. As soon as the taxpayers receive notifications about 1099-K, they can follow the instructions from the app on what to do next. These forms will be sent out on or before Jan 31st and the gain/loss statement will be made available on or before Feb 15th.

What to do with Form 1099-K?

It is an information form that provides a record of all tractions of your business income that happened through the payment processing platform. Therefore, IRS advises reporting this business income in your Tax Return 2022. The gross receipts on the tax returns are calculated from the total income of the business for the tax year.  Therefore, taxpayers should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return. If already included, taxpayers can keep it as a record and cross verify all the income is reported properly.

If there is any mismatch or incorrect information like wrong Tax identification number, incorrect gross income, in Form 1099-K, taxpayers can contact the payment processors through the telephone number listed in the Form.

IRS Audit Group, a tax audit representation agency in Los Angeles is serving the taxpayers in solving issues received from the IRS through its decades of expertise. Get Free Consultation with one of our tax attorneys to discuss your tax issues to take a comprehensive approach.

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