|Sun Jan 1 2012 22:29:22|
Will You Know What to Do with IRS Form 1099K?
By: Ina Steiner
We've been talking a lot about the new IRS Form 1099-K that online sellers have to deal with beginning tax year 2011. It's now the New Year, and you'll soon be receiving the new tax forms - but what do you do with them exactly?
Payment processors including Amazon, PayPal, Google and credit card processors will be required to submit the 1099-K forms for sellers with more than $20,000 in annual sales and more than 200 transactions in a year.
Where do you enter the information on your tax return?
The IRS Schedule C has a new line 1a for entering amounts from Forms 1099-K, but is instructing merchants to enter 0 and instead report such amounts, along with other gross receipts, on the line for all gross receipts.
We consulted Barbara Weltman, who wrote an article about the Form 1099-Ks for Monday's EcommerceBytes - and what sellers need to know as they begin receiving the forms this month.
We also followed up with a couple of questions - here are Barbara's answers.
EcommerceBytes: What if a merchant received a 1099K and it's for transactions that fall under the small business exception - in other words, the processor made a mistake. Do you think the merchant needs to do anything in that situation?
Barbara Weltman: No, there is nothing barring the processor from reporting to small merchants (in fact the IRS would love it); it's just that they're not required to do so. Merchants can't do anything about this.
EcommerceBytes: Using the Schedule C as an example, would merchants report the full 1099Ks on line 1 - gross receipts - and use line 2 for the adjustments?
Barbara Weltman: The gross receipts (including 1099-k amounts) are reported on line 1b; allowances, returns, etc., are reported on line 2 of Schedule C.
Here's some background on the 1099Ks from October's Newsflash, and be sure and read Barbara's article in Monday's Newsflash newsletter for her full report! And as always, consult your tax advisor if you have additional questions.