As if taxes aren’t confusing enough… there’s a new form this year!

1099-K…and the amounts found on this form must be reported.

This is actually NOT a new tax- it is more like a way to improve compliance among businesses accepting payment cards and/or payments accepted from a third party settlement.  Thanks to a provision in the Housing Assistance Tax Act of 2008, the House Ways and Means Committee have found that ” some merchants are failing to report their gross income accurately, including income derived from payment card transactions.”  This provision is expected to raise over $9.5 billion over the next ten years.

This form will be sent out by banks or other institutions that pay merchants and other businesses as settlement for payment card transactions, which can include credit, debit, or gift cards.  PayPal and other similar organizations that are contractually obligated to make payments in a third party network will send the 1099-K to any payee that exceeds $20,000 and has more than 200 transactions.

If you are slightly confused, or greatly confused for that matter, make sure you contact your accountant to find out how to handle the 1099-K.

David W Huff, CPA, PFS, MS is a partner at Person CPA Group. He provides clients with tax preparation and consulting services, accounting services, retirement plan and benefit consulting, accounting software technical support and training, and management advisory services. His specialty is helping new businesses organize their operations to maximize tax savings and move quickly from start-up to profitability.  You can reach David by email at: david@personhuffcpa.com