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The IRS has issued a clarification regarding the new Form 1099-K and how to report 1099-K amounts on your business taxes.
Business merchants who use third-party payment-processing companies for credit-card and e-commerce transactions should have received a Form 1099-K from each of those processing companies by Jan. 31. (This is only required for merchants with at least $20,000 in processed payments and at least 200 transactions last year.)
So how should you report the amounts from Form 1099-K on your business tax return?
For 2011 taxes only, the IRS says you do not have to separately report the amount of merchant card and third-party network payments from Form 1099-K on your tax return. The separate-reporting requirement has been deferred until next year, as the IRS and taxpayers transition to using Form 1099-K.
Instead, here's what the IRS says to do with Form 1099-K figures for 2011:
Congress created Form 1099-K to help the IRS keep better track of electronic payments. By next year, merchants will have to compare their numbers with those reported by payment-processing companies on Form 1099-K.
But critics say Form 1099-K is too burdensome, and suggest it's not clear what happens if there's a discrepancy. Some lawmakers are pushing for a bill to scale back Form 1099-K's requirements, the website The Street reports.
The IRS' Form 1099-K requirements are somewhat confusing, and of course depend on your specific situation. You may want to consult a tax attorney to make sure your return is correctly filed.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.