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What Is This 1099K Form I Got In The Mail?Monday 03/12/2012
DwayneDwayne Briscoe / Bookkeeping-Results, LLC
Owner / QuickBook Pro Advisor

888-692-2083 / 713-898-1648

www.bookkeeping-results.com
What Is This 1099K Form I Got In The Mail?

Many business owners who process credit/debit card transactions for payment of goods and services were likely caught off guard with this new 1099K IRS tax reporting form, and it’s something that needs explaining for those who were unaware of its existence until recently.

 

If you as a business owner have accepted merchant cards for payments or received payments through a third party network that was more than $20,000.00 in gross income transactions AND you processed at least 200 transactions, this is what is being reported to you as well as the Internal Revenue Service.  The merchant card services that process your payments are required by law to have these mailed out by no later than January 31st of every year, and 2012 was the first year for its implementation.  To read your form correctly, here are the explanations for the areas that impact you the most:

 

Payee’s taxpayer identification no. – this is where your correct your EIN or Social Security Number

 

Box 1 – the total gross amount of merchant card/third party network payments made to you through the calendar tax year

 

Box 5a-5l – the gross amount (before credit card processing charges) for each month of the calendar year

 

Now what should you do when you see that there are differences based upon what’s been reported on your 1099K versus what you show in your financial records as well as your merchant statements?  Well the Internal Revenue Service recently reversed their decision to on how credit and debit card payments were reported on the tax returns, which its main purpose was “to increase voluntary tax compliance, improve collections…and thereby reduce the tax gap,” said the IRS.  Fortunately after meeting with several industry groups, the IRS agreed to eliminate this requirement for business owners to reconcile the two numbers, as the IRS Deputy Commissioner Steven T. Miller stated in a February 9th letter to the National Federation of Independent Businesses.

 

Unfortunately with this reconciliation exemption, that will no longer delay the process of receiving your 1099K forms every year.  However it is not to say that if there are major discretions between the numbers reflected on a tax return and a 1099K for a small business owner aren’t going to be overlooked, but could be considered as an audit trigger.

 

Your biggest safeguard is reconciling your credit card processing statement every month against your own financial records, and keeping copies on average for at least 18-24 months.  There is no legal requirement for how long you must hold onto your customer receipts; however this will also help you in any future disputes.  If you utilize the services of a receipt scanning service, such as Shoeboxed who have a long and highly valued track record saving you time and money in receipt scanning.

 

 

About Our Show Advisor: Dwayne Briscoe is the founder and owner of Bookkeeping-Results, LLC.   Dwayne began his company in January 2007, based on the foundation to educate small business owners and bookkeepers who use QuickBooks®.  Working as a full-charge bookkeeper and trainer in a variety of industries for over 15+ years, he is a certified Pro Advisor with 5 certifications, including Enterprise Solutions and Point of Sale.  He is also an instructor at Brazosport College in Lake Jackson, where he teaches basic accounting, QuickBooks®, and basic payroll, along with hosting his own private classes.

 

Bookkeeping-Results, LLC has focused more on quality and not quantity for their clients, by paying attention to the details.  Through regular continuing education participation, as well as exploring additional ways of “thinking outside of the box” to help expand people’s knowledge of their own financial well being, it’s important to focus on not only saving the client money but also making the client money.

 

Previously broadcast from:
SKL @ BlogTalkRadio.com 11/07/2011 - 01/03/2014
CBS Radio's Talk 650 10/12/2009 - 07/01/2011
CNN 650 Radio News 11/08/2006 - 10/08/2009
KSEV AM700 04/04/2005 - 10/30/2006

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