Thursday, 3 January 2013

1099-K Form (Instructions)

 What is tax form 1099-K?

Payments made with a credit card or payment card and certain other types of payment, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity (PSE) under section 6050W and are not to be reported on 1099 Misc. form. In simple words, a 1099-K form is used to report income that you received from credit cards, debit cards, or other electronic payments, such as eBay and Pay Pal. Businesses that will see their income reported on form 1099-K are those with more than 200 credit card transactions and more than $20,000 gross income from credit card sales.

Who is supposed to file form 1099-K?

Every payment settlement entity which in any calendar year makes one or more payments, or any party which submits instructions to transfer funds to the account of a participating merchant, in settlement of reportable payment transactions, must file informational return form 1099-K with respect to each participating payee for that calendar year.

Exceptions to form 1099-K: The following transactions are non-reportable on form 1099-K
  • A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder’s account
  • A check issued in connection with a payment card that is accepted by a merchant or other payee.
  • Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
Instructions to e-file form 1099-K:

·        Filer’s name and address: Enter your name, address (including street address, city, state, and ZIP code) and telephone number in the box in the upper left corner.
·         Telephone number: The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form.
·        Federal identification number boxes: Enter your federal identification number in the top box immediately to the right.



Filer check boxes:

Check the first (top) box in the section immediately below the FILER’S name, street address, city, state, ZIP code, and telephone number box if you are a PSE. Check the second box (bottom) if you are an EPF or TPP. If you are an EPF or TPP, enter the PSE’s name and telephone number in the box above the account number box at the bottom left of the form. The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form.

Account Number

The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-K. Additionally, the IRS encourages you to designate an account number for all Forms 1099-K that you file.

Box 1. Gross amount of merchant card/third party network payments

Enter in box 1 the gross amount of the total reportable merchant card/third party network payment transactions for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

Box 2. Merchant category code

Enter the 4-digit merchant category code (MCC) used by the payment card industry to classify the payee for the merchant card payments reported on this Form 1099-K. If you use an industry classification system other than, or in addition to, MCCs, assign to each payee an MCC that most closely corresponds to the description of the payee’s business.
Note
TPSOs do not use MCCs to classify payees and should not complete this box.
If a merchant has receipts classified under more than one MCC, you may either:
·     File separate Forms 1099-K reporting the gross receipts for each MCC, or
     File a single Form 1099-K reporting total gross receipts and the MCC which corresponds to the largest portion of the total gross receipts.

Box 3 and 4
Reserved.

Boxes 5a through 5l
Enter in the appropriate box the gross amount of the total reportable payment transactions for each month of the calendar year.


There are service providers offering e-filing for 1099 forms and services such as download form 1099, however 1099online.com offers the most reliable and efficient e-filing for 1099 forms. 1099online.com is an IRS approved e-file provider having the most advanced and secure software to e-file 1099 forms. Filing 1099 forms with 1099online.com is quick, secure and very easy. Moreover, there are many free services offered to businesses and individuals to efile 1099 forms with 1099online.com.

IRS update and rules for filing 1099 K


IRC Section 6050W was added to the Internal Revenue Code as part of the Housing & Economic Recovery Act of 2008. Its purpose is to improve voluntary tax compliance by businesses that accept payment via purchase cards.

According to IRC section 6050W, payment settlement entities (banks and third party payment network processors) are required to issue form 1099-k (payment card and third party network payments) to participating merchants reporting all payment card transactions that were processed in prior tax year which in the current scenario is year 2013. According to the rules and regulations, any transaction that has happened using debit card, credit card or transactions settled through third party payment networks like Pay pal, E-bay must be reported using form 1099-k.

1099-K form reporting and regulations apply to every organization and industry that uses electronic payment transactions through payment cards or third party settlement organizations for their business.

1099-K form for transport industry and Cab drivers

1099-K form has impacted every business big and small including the vast transport industry. Transportation industry including fleet owners and independent cab drivers are required to file form 1099-K. Non compliance with the new rules and regulations by the transport industry could result in hefty penalties.
According to Section 6050W, IRS requires banks or entities such as third party settlement organizations to provide 1099-K form to transport companies that accept credit card as a form of payment for tax year 2011. Transport companies can expect to receive the 1099k form from its bank early 2013. The 1099-K form will report the total gross receipts for the company from credit card transactions processed in year 2012.

On the other hand, besides receiving form 1099-K from the bank or other third party settlement organization, transport companies under ‘aggregate payee rule’ are supposed to issue and file a 1099-K form for each driver that it hires on an independent contract basis. In other words, if a transportation company receives the proceeds of credit card transactions from its bank (or other entity that settles electronic payment transactions), on behalf of its independent contractor drivers who accept credit card payments, and that transportation company then distributes the proceeds to the driver, then in such case the transportation company must issue a Form 1099-K to each driver reporting the gross proceeds from credit card payments.

Hence, under this rule the transportation company will not only receive a Form 1099-K from its bank (or card processor), but it will also have to file a Form 1099-K for each independent contractor driver to whom it has paid or credited amounts on account of fares and tips paid by credit card, reporting the gross amount paid to the independent contractor driver.

Thus if you are an owner of a transport company and have hired 15 independent cab drivers who accept credit cards payment from passengers and the transactions are processed through your company, then it is your duty to provide each driver a 1099-k form.

There are no 1099-K form filing exceptions for Cab drivers

Many people are asking if there are any exceptions to 1099-k form filing. However till now for payment card processing companies there are no exceptions. A single credit card transaction is enough to trigger the filing of 1099-K form. But, there is a de minimus rule for third party settlement organizations which says that third party settle network must have minimum of $20,000 annual gross payment or minimum 200 transactions. However this rule does not apply for credit card transactions or to the “aggregate payee” requirement that a transportation company issue Forms 1099-K to drivers who have accepted credit card transactions.

1099-K form reporting requirement for transport industry and cab drivers

There are certain questions being asked by transport companies such as ‘being an owner of a transport company am I required to file 1099-K form for fares paid to driver using company voucher?’ or ‘Do I have to file form 1099-K or receive form 1099-K from banks if I have drivers as employees?’ The answer to both these questions is NO. Fares paid by credit card are eligible to be filed using form 1099-K but not fares paid using company voucher. If your company has hired cab drivers as employees and you pay them monthly salary, then the company will receive form 1099-K from its bank that process credit card transactions but is not required to issue a 1099-K form to its employee drivers.

Certain transactions that trigger the filing of IRS 1099-k form are: lease payments paid by drivers using personal credit card, if a business pays its monthly invoice using credit card and if a customer purchases prepaid cab fare card using a credit card.

However, there are certain transactions that do not require form 1099-K to be filed by a transport company. These transactions include:


  • Issuing a credit card to a driver as an alternate form of payment
  • Using a debit card to withdraw cash from ATM
  • Cash advances on credit card
A transport company before filing form 1099-k should ensure that they have all the information necessary to file 1099-K form. It’s best that the company gets form W9 filled by the driver so that they can have the driver’s tax identification number (EIN, SSN), legal name and address on an official form.

In Order to avoid tax withholding and other possible penalties it is advisable that it is important that companies keep accurate records reflecting the amount of credit card fares submitted by each driver in order to prepare and file an accurate Form 1099-K. Form 1099-K must be filed with IRS by Feb 28th 2013 for paper filers and by April 2nd if opting to efile 1099k
 

IRS update: Considering that this is the first year when form 1099-k will be used by businesses all over, hence IRS is granting penalty relief for inaccurate data submitted on form 1099-K provided that the payer has made a good faith effort to report the correct information, and has actually filed Forms 1099-K in a timely manner and provided a copy to the payee.


Thursday, 16 February 2012

Form 1099 – K (Instructions and requirements to efile 1099-K form)

What is tax form 1099-K?

Payments made with a credit card or payment card and certain other types of payment, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity (PSE) under section 6050W and are not to be reported on 1099 Misc form. In simple words, a 1099-K form is used to report income that you received from credit cards, debit cards, or other electronic payments, such as eBay and Pay Pal. Businesses that will see their income reported on form 1099-K are those with more than 200 credit card transactions and more than $20,000 gross income from credit card sales.

Who is supposed to file form 1099-K?

Every payment settlement entity which in any calendar year makes one or more payments, or any party which submits instructions to transfer funds to the account of a participating merchant, in settlement of reportable payment transactions, must file informational return form 1099-K with respect to each participating payee for that calendar year.

Exceptions to form 1099-K:The following transactions are non-reportable on form 1099-K
  • A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder’s account
  • A check issued in connection with a payment card that is accepted by a merchant or other payee.
  • Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
Instructions to efile form 1099-K:

Filer’s name, address, telephone number, and federal identification number boxes
Enter your name, address (including street address, city, state, and ZIP code) and telephone number in the box in the upper left corner. The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form. Enter your federal identification number in the top box immediately to the right.

Filer check boxes

Check the first (top) box in the section immediately below the FILER’S name, street address, city, state, ZIP code, and telephone number box if you are a PSE. Check the second box (bottom) if you are an EPF or TPP. If you are an EPF or TPP, enter the PSE’s name and telephone number in the box above the account number box at the bottom left of the form. The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form.

Account Number

The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-K. Additionally, the IRS encourages you to designate an account number for all Forms 1099-K that you file.

Box 1. Gross amount of merchant card/third party network payments

Enter in box 1 the gross amount of the total reportable merchant card/third party network payment transactions for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

Box 2. Merchant category code

Enter the 4-digit merchant category code (MCC) used by the payment card industry to classify the payee for the merchant card payments reported on this Form 1099-K. If you use an industry classification system other than, or in addition to, MCCs, assign to each payee an MCC that most closely corresponds to the description of the payee’s business.

Note

TPSOs do not use MCCs to classify payees and should not complete this box.
If a merchant has receipts classified under more than one MCC, you may either:
  • File separate Forms 1099-K reporting the gross receipts for each MCC, or
  • File a single Form 1099-K reporting total gross receipts and the MCC which corresponds to the largest portion of the total gross receipts.
Box 3 and 4
Reserved.

Boxes 5a through 5l
Enter in the appropriate box the gross amount of the total reportable payment transactions for each month of the calendar year.

There are service providers offering efiling for 1099 forms and services such as download form 1099, however 1099online.com offers the most reliable and efficient efiling for 1099 forms. 1099online.com is an IRS certified efile provider having the most advanced and secure software to efile 1099 forms. Filing 1099 forms with 1099online.com is quick, secure and very easy. moreover, there are many free services offered to businesses and individuals to efile 1099 forms with 1099online.com.

IRS update – New 1099-k form rules that apply to transportation companies and cab drivers

IRC Section 6050W was added to the Internal Revenue Code as part of the Housing & Economic Recovery Act of 2008. Its purpose is to improve voluntary tax compliance by businesses that accept payment via purchase cards.

According to IRC section 6050W, payment settlement entities (banks and third party payment network processors) are required to issue form 1099-k (merchant cards and third party network payments) to participating merchants reporting all payment card transactions that were processed in prior tax year which in the current scenario is year 2011. According to the rules and regulations, any transaction that has happened using debit card, credit card or transactions settled through third party payment networks like Pay pal, E-bay must be reported using form 1099-k.

1099k form reporting and regulations apply to every organization and industry that uses electronic payment transactions through payment cards or third party settlement organizations for their business.

1099-k form for transport industry and Cab drivers

1099-k form has impacted every business big and small including the vast transport industry. Transportation industry including fleet owners and independent cab drivers are required to file form 1099-k. Non compliance with the new rules and regulations by the transport industry could result in hefty penalties.
According to Section 6050W, IRS requires banks or entities such as third party settlement organizations to provide 1099-k form to transport companies that accept credit card as a form of payment for tax year 2011. Transport companies can expect to receive the 1099k form from its bank early 2012. The 1099-k form will report the total gross receipts for the company from credit card transactions processed in year 2011.

On the other hand, besides receiving form 1099-k from the bank or other third party settlement organization, transport companies under ‘aggregate payee rule’ are supposed to issue and file a 1099-k form for each driver that it hires on an independent contract basis. In other words, if a transportation company receives the proceeds of credit card transactions from its bank (or other entity that settles electronic payment transactions), on behalf of its independent contractor drivers who accept credit card payments, and that transportation company then distributes the proceeds to the driver, then in such case the transportation company must issue a Form 1099-K to each driver reporting the gross proceeds from credit card payments.

Hence, under this rule the transportation company will not only receive a Form 1099-K from its bank (or card processor), but it will also have to file a Form 1099-K for each independent contractor driver to whom it has paid or credited amounts on account of fares and tips paid by credit card, reporting the gross amount paid to the independent contractor driver.

Thus if you are an owner of a transport company and have hired 15 independent cab drivers who accept credit cards payment from passengers and the transactions are processed through your company, then it is your duty to provide each driver a 1099-k form.

There are no 1099-k form filing exceptions for Cab drivers

Many people are asking if there are any exceptions to 1099-k form filing. However till now for payment card processing companies there are no exceptions. A single credit card transaction is enough to trigger the filing of 1099-k form. But, there is a de minims rule for third party settlement organizations which says that third party settle network must have minimum of $20,000 annual gross payment or minimum 200 transactions. However this rule does not apply for credit card transactions or to the “aggregate payee” requirement that a transportation company issue Forms 1099-K to drivers who have accepted credit card transactions.

1099-k form reporting requirement for transport industry and cab drivers

There are certain questions being asked by transport companies such as ‘being an owner of a transport company am I required to file 1099-k form for fares paid to driver using company voucher?’ or ‘Do I have to file form 1099-k or receive form 1099-k from banks if I have drivers as employees?’ The answer to both these questions is NO. Fares paid by credit card are legible to be filed using form 1099-k but not fares paid using company voucher. If your company has hired cab drivers as employees and you pay them monthly salary, then the company will receive form 1099-k from its bank that process credit card transactions but is not required to issue a 1099-k form to its employee drivers.

Certain transactions that trigger the filing of IRS 1099-k form are: lease payments paid by drivers using personal credit card, if a business pays its monthly invoice using credit card and if a customer purchases prepaid cab fare card using a credit card.

However, there are certain transactions that do not require form 1099-k to be filed by a transport company. These transactions include:

  • Issuing a credit card to a driver as an alternate form of payment
  • Using a debit card to withdraw cash from ATM
  • Cash advances on credit card
A transport company before filing form 1099-k should ensure that they have all the information necessary to file 1099-k form. It’s best that the company gets form W9 filled by the driver so that they can have the driver’s tax identification number (EIN, SSN), legal name and address on an official form.

In Order to avoid tax withholding and other possible penalties it is advisable that it is important that companies keep accurate records reflecting the amount of credit card fares submitted by each driver in order to prepare and file an accurate Form 1099-K. Form 1099-k must be filed with IRS by Feb 28th 2012 for paper filers and by April 2nd if opting to efile 1099k
 

IRS update: Considering that this is the first year when form 1099-k will be used by businesses all over, hence IRS is granting penalty relief for inaccurate data submitted on form 1099-k provided that the payer has made a good faith effort to report the correct information, and has actually filed Forms 1099-K in a timely manner and provided a copy to the payee.

The regulations under section 3406 require that backup withholding apply to section 6050W payments made after December 31, 2011, if a payee has not furnished a correct taxpayer identification number (TIN) for form 1099-k. However the backup withholding rule has been postponed and will apply only after December 31st 2012.