Additional Information On The New 1099-K

by Kenneth Hoffman in ,


If you make payments to service providers, landlords, sub-contractors, etc. that you would normally send 1099-Misc to, you can pay them by credit/debit card and be relieved of having to provide them a 1099-Misc at year end. 

No 1099-MISC if paid by credit card.  In the instructions to Form 1099-MISC, the IRS has made it clear that payments made with a credit card, debit card, or through any third-party payer, are not reported on Form 1099-MISC.

It is important that you track which vendors you pay by credit/debit card and the ones you pay by check, which you must provide 1099's to if they are paid more than $600.

New for 2011 is the 1099-K.  The 1099-K will be used for matching purposes by the IRS computers to ensure that businesses are reporting all of their income.  The information contained in the 1099-K will include sales tax, shipping, charge backs and other charges. Adjustments may have to be made in order to properly reconcile the books against the 1099-K. It is important that payments received via credit/debit cards are properly tracked.

The 1099-K is issued by your merchant provider if the payee has more than 200 transactions or more than $20,000 of gross income paid to them. Even though the merchant provider does not need to issue a 1099-K to their payees, it is unclear if the merchant provider will report the information to the IRS anyway. 

There is a lot of mis-information on the internet concerning the 1099-K. Please email this to your colleagues and business associates. 

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