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Online Income and the 1099-K

If you are a business and accept payments online, you will receive Form 1099-K, Payment Card and Third Party Network Transactions from credit card or third party processors. 1099-K is an information return used to report all qualifying payments made with a debit card, credit card or stored-value cards during a year. 1099-Ks are important to accurately determine your total income and pay taxes accordingly.

What Does 1099-K Include?

Form 1099-K includes the gross amount of all reportable payments made online. Any payment that has been made with a payment card, any account number or any identifying data associated with a card is considered a reportable payment and included in 1099-K. There is no threshold for payment cards. However, payments settled through a third party must be reported only if:

  • They exceed $20,000, and
  • There are more than 200 such transactions

Who Receives a 1099-K?

Any business that accepts online credit card payments from customers receives a 1099-K. Usually, the form is received by January 31st. If a processor has not sent a 1099-K by this date, you may contact them. If you still do not receive the form, you may report all your online income on Schedule C, Form 1040.

Filing and Record Keeping

Whether the income received is in cash or made by credit/debit card payments, stored-value cards, checks, or any other method of payment, it needs to be reported on your tax return. For all qualifying online payments, you will receive 1099-Ks, which will help you to determine your gross receipts (gross income is generally called gross receipt on a tax return) accurately.

When preparing your tax return, ensure that you have received 1099-Ks from all payment processors. Estimating your income less than what you actually received can result in inaccurate reporting and tax payments, which presents a risk of IRS penalties and audits.

Keep your 1099-Ks with your tax records. They provide evidence of your online income from all sources during the year.