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Sun Jan 1 2012 22:29:22

Will You Know What to Do with IRS Form 1099K?

By: Ina Steiner

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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.

Confused?

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.




Comments (19) | Permalink

Readers Comments

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: pete

Sun Jan 1 23:12:30 2012

When will Americans wake up and see they are being held as slaves by the US Gov and Finance theives

Until you stand up and say enough you will only go 1 way and thats down

Ask any of your friends if they know what the NDAA Indefinite Detention Bill is?? it was signed into Law by YOUR President on NEW YEARS EVE!!!!!!!!!!!!!!!!!!!!

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Mary

Mon Jan 2 08:37:29 2012

Surely any company is asking for lawsuits, bad publicity, and loss of customers whom might make such "mistakes". Barbara isn't working for any payment processor is she? To say there's nothing a merchant can do sounds like company speak. Merchants do have recourse. Does Barbara have some inside info regarding "mistakes"? She mentions it twice, 1x in her main article and again in this follow up. A "mistake" hardly seems possible as payment processors are good at counting yearly financials thanks to their good ol math counting computers. The 2010 financial summaries worked just fine, mistake free.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Mary

Mon Jan 2 09:14:23 2012

From www.paypal.com/irs

  "Will all sellers receive a Form 1099-K?
No. Only sellers who exceed the IRS thresholds will receive Form 1099-K. Sellers exceed the IRS thresholds when they receive over $20,000 USD in gross payment volume for the sale of goods or services AND receive over 200 payments for goods or services in the same calendar year."
The more I think about it, the more I find it disingenuous the implication that mistakes may happen is being set forth. What purpose does fear-mongering serve? Why is it even part of the article? How about some real reporting? The readers of these articles deserve better than tabloid quality Jerry springer rabble rousing writing.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Red Ink Diary This user has validated their user name.

Mon Jan 2 10:41:09 2012

@ pete

We have a dog, he is earns his keep because we do not have to run to the gate and bark at strangers. We also have an accountant, she is useful because she makes sure we do not pay more in federal or state taxes than we need and she keeps it legal. We save much more than the cost of her services every year.

Anyone who plays chicken with the IRS has less brains than a chicken.

If you are running a business you need to keep records. If you choose not to keep records you will pay more in taxes.

Taxes and regulation in the USA are ridiculously low compared to the rest of the civilized world. Like many Americans you don't have any idea what life is like in the rest of the world, or how fortunate you are to be an American.

Your comment about the NDAA is completely off topic but since you brought it up . . .

Your president signed legislation written by your representatives in Congress and the Senate. He didn't make it up all by himself, in fact he threatened to veto it.

The National Defense Authorization Act is the $662 billion law that authorizes the Treasury Department to fund the Defense Department so our soldiers get a paycheck. It has been passed every year since 1953.

The portion of the Bill you so rightly object to is a rider which denies basic rights guaranteed under the 4th, 5th, 6th and 8th Amendments. If it were ever actually implemented it would be unconstitutional. Period. However, some very basic research will tell you exactly who inserted that rider into 'must pass' legislation.

Your constitutional remedies against them are very clear, vote them out.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Carol

Mon Jan 2 11:01:59 2012

I have always claimed my NET received from all auction sites.  When it became evident paypal will now determine my gross, I decided to ask for monthly statements.  Well, they certainly do not do the type of accounting that I learned.  Nothing noting what was spent for shipping through paypal, nothing noted for my listing service which is paid through paypal, and nothing noted just for purchases through paypal.  NO totals, for each column, noting that makes for good accounting practices that I have ever worked with in my several years of accounting work.  I am NOT a CPA, but have I guess what would be called bookkeeper work, even when been calling accountant.  I believe if paypal is responsible to accumulate these payments through their service, they also should be responsible to have a column or two to listing expenditures from those payment, the gross.  I have contacted paypal about these concerns and no one seems to understand what I am trying to ask, who are the bookkeepers????  Carol

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Julie

Mon Jan 2 11:37:26 2012

I just think this is ridiculous... we always report our sales every year for our business, less the fees, shipping costs, cost of goods, refunds, etc. We use PayPal Merchant Pro for our site, along with Google Checkout.

Will this 1099-K accurately reflect what a company actually took in, or just what was charged when the order was placed. What about changes to these orders, such as back order items, or deleting items from an order? Does PayPal report the final amount or the amount that was originally authorized? We don't charge until we ship, and we adjust the amounts if needed and only charge what the final order is for. And what about when we refund or have a chargeback, are they minusing those amounts from the gross totals reported? What about canceled orders when the fund are never captured and simply voided on the payment processor end?

I'm all for rules and regulations but somehow this process seems off. We keep records of every income and expense for our company. We are responsible for reporting the amounts. If PayPal says we did $500,000, but our books say $495,000, what are we supposed to do? Would PayPal be held accountable for the $5000 difference? I doubt it..... This whole thing just rubs me the wrong way...it's more rules and regulations brought about by the dishonest businesses and cheaters.  

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

This user has validated their user name. by: Philip Cohen

Mon Jan 2 11:50:22 2012

@Carol,
PreyPal only knows the total value of your transactions paid for by PreyPal. How could they possibly know what the freight, or any other costs, were? And what have your outgoing payments made via PreyPal got to do with the "gross" value of your sales that PreyPal is required to report? Did you say that you did accounting work? Sheesh!

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: anyone out there yet

Mon Jan 2 17:45:48 2012

I have this little itty bitty space available in my trash can for it.

Just kidding as I have ALWAYS claimed my income from Fleecebay unlike some of the criers we will be hearing from in the near future.

Those are the DEAD BEATS the IRS is looking for and I'm willing to bet there are going to be more than enough to keep the IRS from looking at the rest of us for years to come.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

This user has validated their user name. by: TheCheapSkirt
Web Site

Mon Jan 2 17:50:08 2012

Looks like some of the commenters here need to take an Accounting for Small Businesses 101 course.  Yikes!

Anyone filling out a Schedule C knows you report your gross receipts, your refunds, your expenses (including shipping, fees, advertising), cost of goods sold, etc.  And that it is all documented with backup materials. You don't just "claim net sales".

And anyone using Excel knows how to download a year's worth of PayPal transactions into a .csv file, open it up, sort by transaction type, do a subtotal sum on the amounts and have their data for a good portion of that Schedule C.

I'm really puzzled as to how some of the commenters here have been getting by.  Haven't you been claiming your business income on your taxes every year?  This shouldn't be something new...

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Rich

Mon Jan 2 17:56:20 2012

Like any business; people need to keep their receipts for expenses.  The tough part of selling on Ebay and keeping good records is that Ebay sellers do not get receipts when they go to garage sales or maybe buy on Craigslist and buy stuff to resell.  And ebay sellers who sell items they bought many years also don't have the receipts.  My guess is the IRS audits some ebay sellers and laughs when they realize the majority of Ebay sellers make very little after their Ebay and Paypal fees; the shipping cost, the cost of the box and tape, the cost of inventory and all other expenses.  The government is hopig for lots of tax revenue to come from this new internet 1099 idea, but my guess is most large businesses already report their income and the smaller sellers make little profit

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: carol

Mon Jan 2 18:27:38 2012

attn:  Philip Cohen, I have NO problem with ebay sending 1099 for my gross, I just think they should also offer the sellers a total on postage paid through them, plus other expenses paid through them, if they list those expenses it is easy to determine the every month charge from my listing service.  How do they know what I paid for postage through them?  Same way they also know how much money goes through there, I also want a column that tells what fees they kept, refunds, etc.  There programs should have no problem giving the seller this information.  I know it won't be on the 1099, but most places send information of how much interest you pay each year on an account, etc.  I have always paid my taxes, even way back to the beginning, and even when payment with money orders and checks, as each was posted into my business account, my Quick books can tell me how much I paid for things I purchase, and surely paypal can also tell us the break down of our expenses through them, fees, shipping paid through them, refunds.  Is that too much to ask?  Carol

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

This user has validated their user name. by: Philip Cohen
Web Site

Mon Jan 2 20:40:55 2012

Carol,

Make up your mind. Are we talking about the eBay or PayPal? PreyPal only knows your gross. The eBafia would be able to break up their gross somewhat but are they the entity required to produce the 1099-K report? I thought it was only the “payments processors”, ie, those providing “merchant accounts”, that were required to do so.

Hang on, PreyPal claims that it is not a “payments processor”, and so, by eBafia/PreyPal’s peculiar form of logic, their “merchant accounts” are not really merchant accounts, they are simply delusions, like fairies at the bottom of the garden!

Oh, whew! That was close. PreyPal merchants don’t really have anything to worry after all.

eBay / PayPal / Donahoe: Dead Men Walking.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: ebay sucks

Tue Jan 3 11:59:08 2012

If I ever receive a 1099 from the IRS I will simply send it back with a note telling them to shove it up their arse.  Why would I give a freakin penny to a corrupt entity that squanders and abuses peoples hard earned money away so recklessly.  

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

This user has validated their user name. by: Philip Cohen
Web Site

Tue Jan 3 13:37:04 2012

@ebay sucks

Are you talking about eBay or the govt?

eBay / PayPal / Donahoe: Dead Men Walking.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: ebay sucks

Tue Jan 3 13:58:27 2012

@ Philip

I guess eBay/Paypal is basically the same as the US Govt with one exception in that you still can make a few cents on eBay as a slave and the US Govt just wants their extortion money no matter where you get it from.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

This user has validated their user name. by: Philip Cohen
Web Site

Tue Jan 3 21:25:44 2012

Ah, the “Ho” has just disposed of another 8,750 eBay shares.

http://investor.ebayinc.com/secfiling.cfm?filingid=1321
240-12-2

It
depends from when you start counting, but by my calculations the “eBafia Don” is about to enter the fifth year of his “three-year” turn-around. Isn’t it great then to see a CEO displaying such confidence in his ability to be add value to eBay’s share price?

eBay / PayPal / Donahoe: Dead Men Walking.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Walker

Wed Jan 4 10:27:28 2012

PayPal says it can separate out personal payments.  I have less than a handful but I can't figure out which ones were personal payments?  

I know the eBates rebates are personal payments.  How about when a seller refunds me money but not via the original transaction?  I see I paid no fees but I have no idea if PP and the IRS considers it a payment or what?

PayPal needs to make the Personal Payments more identifiable.

Like I said, I only have a handful (like when a friend sent me money for makeup).  I just hope they really do pull these out of their calculations.

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: eyetweaks
Web Site

Thu Jan 5 15:12:59 2012

ebay sucks, been a member for over ten years.  i decided to sell a few items with my 99.8% FB rating.  I got my items sold for free shipping against my will, then ebay/preypal stole my money and placed it on a 21 day hold and told me they would decide at a later date if and what i get paid depending on if no one complains i shipped too slowly since tis was the initial complaint that casued these actions to take affect.  Then a few days later they told me i could no longer buy and now my account has been disabled.  I refuse to ever use ebay or one of its affiliates again.  Closed ebay and paypal accounts and said FU Ebay you suck...

Will You Know What to Do with IRS Form 1099K?   Will You Know What to Do with IRS Form 1099K?

by: Patricia This user has validated their user name.

Sat Jan 28 13:02:27 2012

@ebay sucks....I understand your feelings but are you aware that the IRS can take everything you own?  They simply seize it without warning. No need for courts or cops - they have that power....which is why most people fear them.



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