Ratings and Reviews

What is a 1099-K Form

Many business owners recently found themselves dealing with IRS form 1099-K, which is used to report electronic transactions made through credit card terminals and third party accounts (like PayPal) which take cards on a company or individual's behalf. The difference between this 1099 and other 1099 forms is that it breaks out gross transaction amounts by month. It should be noted that if you have refunds or other adjustments they don't show up on the form, which means that you have to be really careful about your taxes or you will be overpaying.


1099-kThe 1099k form comes courtesy of the Housing Assistance Tax Act as a way to keep online sellers from under-reporting their income, but the form also falls onto small business owners who take credit card transactions through terminals. There is an entire field of validation and confirmation which is not discussed here, but suffice it to say that if your info was not matched between the IRS and your processor you would be seeing a 28% backup withholding rate.

Tracking Adjustments and Deductions

Your processor generates the form and sends a copy to you and a copy to the Internal Revenue Service. When you get this form, it is very important to verify that all of the information matches up with your payment processor's records, and that the name, Taxpayer Identification Number, and check boxes are correct. Some incorrectly matched companies have had big problems in the past, and you don't want to be one of them.

As an explanation of what's on the form itself, box 1 shows the total amount of transactions, or the gross. Box 2 is your MCC, or merchant category code. Box 3 indicates the total number of payments or transactions. Box 4 shows the federal income taxes withheld, which is often zero if you are a corporation. Box 5 is actually 12 boxes, subset as a through l, showing each individual month. Because I like to type, 5a is January, 5b is February, 5c is March, 5d is April, 5e is May, 5f is June, 5g is July, 5h is August, 5i is September, 5j is October, 5k is November, 5l is December. Box 6 is your State, Box 7 is your state ID number, and Box 8 is the State income tax withheld.