One question that we’ve been asked frequently by our merchants and their CPA’s is in regards to the 1099-K.
The 1099-K reports all card transactions (Debit, Credit and prepaid cards) that are processed on your behalf by your credit card processing company. According to the IRS website:
“You should receive Form 1099-K by January 31st if, in the prior calendar year, you received payments:
– from payment card transactions (e.g., debit, credit or stored-value cards), and/or
-in settlement of third-party payment network transactions above the minimum reporting thresholds of –
– gross payments that exceed $20,000, AND
– more than 200 such transactions
It is important to note that the amount reported is Gross. As some processing fees are deductible, we recommend that you also provide your accountant with copies of your statements to take advantage of any income reductions associated with processing fees.
One other question we’ve had is, “Why do my statements not always match the 1099-K?” According to one processor, Clearent:
“The IRS requires us to report sales by the transaction date on the 1099-K, whereas your monthly statement reports sales by settlement date to align with the deposits in your account.”
In this case, if you ran a transaction December 31st, that was settled the following day, January 1st, it would be reported on your 1099-K for the year, but would appear on next year’s January statement.
Additionally you may receive multiple 1099-K’s depending on the status of your current relationships. If you have multiple accounts to accept credit cards or your American Express is billed separately, you will likely receive more than one 1099-K. As also stated by Clearent:
“The 1099-K may not include all card types because the IRS requires us to report only card types that we settle (i.e., deposit into your account). If you get a separate statement from American Express or Discover, those sales may be included on your [Processor] statement, but not on your [Processor] 1099-K.”
If you have any additional questions on understanding 1099, feel free to contact us at firstname.lastname@example.org.
The Agapay Team