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10 new tax law changes to know
Form 1099-K is another new form that’s part of expanded IRS efforts to track taxpayer income.
Companies that process credit and debit cards as well as third-party network payments (PayPal, Amazon, eBay and the like) now must report the gross amount of those payments to merchants on 1099-K and copy the IRS.
There is an exception for smaller businesses. If the payment transactions are fewer than 200 and total less than $20,000, the 1099-K reporting is not required.
And because of concerns about confusion with the new form, the IRS has deferred the requirement that taxpayers report 1099-K amounts on 2011 taxes. But this attempt to make things easier could backfire.
Filers of business returns, including Schedule C used by sole proprietors, will see a new line on their applicable tax returns for 1099-K income. But the business returns’ instructions say to enter zero on the line designated for reporting 1099-K amounts and instead report such earnings on the line for all gross receipts.
If you do get a 1099-K, be sure to carefully follow the new form’s reporting rules so the income is entered properly on your tax return.