IRS 1099 K Tax Form for Online Business Owners: Did you sell products online and accept payment card transactions? Then you may get a Form 1099 K in the mail. This form can help you properly account for revenues so you avoid underpaying your federal income tax obligation.
If you do business online, by selling products and accept payments from third-party networks. Then you may get a Form 1099 K in the mail in the starting month of February. Here are some things to know if you receive the form, including guidance on reporting your revenues correctly.
Which 1099 Form used for online business?
Online retailers use 1099 K Form to report sales for tax purposes. In other words, it is an accountability tool that the IRS put in place to make sure online retailers are not under-reporting their sales and income.
For example: If you report your taxes and you don’t claim your online sales, the IRS would know because they would’ve received Form 1099 K. 1099 K form used to report payments received through third party network transactions.
1099 K Tax Form purpose
IRS Form 1099 K came into existence as part of the 2008 Housing Assistance Tax Act. This Form strives to ensure that all online retailers are reporting sales for tax purposes. It requires credit card companies, such as MasterCard and visa, and third-party processors, such as PayPal and Amazon. It reports payment card transactions they process on behalf of retailers. Therefore, if you accept credit card payments online, you may end up with a 1099 K Tax Form. You’ll receive 1099 K Form that summarizes all of your sales transactions with each processor.
Who gets a 1099 K Form?
Most retailers who accept online credit card payments from customers will now receive 1099 K Form. If your annual processing activity has met the following criteria, you need to file Form 1099 K:
Form 1099 K versus 1099 MISC
Prior to the implementation of Form 1099 K, many businesses required to provide a 1099 MISC Form to their suppliers. Report the transactions on both the Forms when occurred through third party network transactions.
IRS has directed that any 1099 MISC payments that are reported on a 1099 K should be reported on the latter form only. Many companies are still providing 1099 MISC forms. To avoid double taxation, keep detailed sales records and deduct payments reported on 1099 MISC Form from Form 1099 K before reporting. Be prepared to explain the deductions to the IRS.
Reporting 1099 K on your tax return
When you receive Form 1099 K online, it’s important to compare the information to your own records. To make sure there aren’t any mistakes. Use the Form, to report the income received to the IRS on your tax return.
Beginning with 2021 tax year, if you’re self-employed report your 1099 K payments on Schedule C. Double check your total business income by comparing the total revenue on Schedule C to your profit and loss statement. If you’re filing Schedule F for farming, 1099 K payments are reported there.
Key dates to file 1099 K Forms
Rules and deadlines for filing 1099 Forms are constantly revised. It’s important for tax professionals to stay on top of the changes. Here are the changes coming for the upcoming tax filing session involving1099 K. Submit your paper Forms through the mail by March 1st, 2021. Issue the recipient copy of the Form by February 1st, 2021. File 1099 K Tax Form with the IRS by March 31st online.
Every individual must file 1099 K form as early as possible. On-time filing avoids late filing penalties and due dates.
We are the best online tax preparation and filing services. You can File Form 1099 K, 1099 MISC, and many other common tax forms with 1099 NEC Tax. So you may able to e-file your own taxes, even with 1099 K income.
