IRS Form 1099 K - Payment Card & Third Party Network Transactions

Updated on February 3, 2022 - 10:30 AM by Admin, TaxBandits

The IRS Form 1099-K is used to report payments processed by payment settlement entities (PSEs). A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year.

Like other forms in the 1099 series, form 1099-k has an important purpose – reporting credit card and third-party transactions. In this article, let’s explore more about the form and its filing requirements.

In this article, we cover the following topics:

1. What is Form 1099 K?

Form 1099-K, Payment Card and Third Party Network Transactions, is an IRS information return used to report certain payment transactions to improve voluntary tax compliance. These transactions include income received from electronic payments such as credit cards, debit cards, PayPal, Uber, Lyft, and other third-party payers.

2. What Is a Payment Settlement Entity?

A Payment Settlement Entity (PSE) refers to an entity that makes payment in settlement of a payment card transaction (credit card, debit card, or other payment cards) or third-party network transaction.

There are two types of PSE.

  • Merchant Acquiring Entity: An organization that has a contractual obligation to make payment to participating payees in the settlement of payment card transactions.
  • Third-Party Settlement Organisation: An organization that has the contractual obligation to make payment to participating payees of third-party network transactions.

3. Who Needs to File Form 1099-K, Payment Card and Third Party Network Transactions?

Form 1099-K must be filed by every Payment Settlement Entity (PSE) for each participating payee's reportable payment transactions. Reportable payment transactions include payment card transactions or third-party network transactions.

4. When is Form 1099-K issued?

You received Form 1099-K because you must have met any of the following criteria
mentioned below.

  • You received payments from payment card transactions such as debit, credit, or store-valued cards OR
  • The IRS processed at least $20,000 worth of payments and at least 200 transactions for you from third-party payment network transactions in the past calendar year.

Note: If you don’t meet the requirements stated above, you are not required to issue
Form 1099-K.

5. Information required to E-file Form 1099-K

To complete your form 1099-K with ZERO ERRORS, ensure you have all the essential information handy. We have listed the information required to complete your Form 1099-K.

  • Filer Details: Name, EIN, and Address
  • Payee Details: Name, TIN, Address Payment settlement entity (PSE) or Electronic Payment Facilitator (EPF) or Other third party Details
  • Payment Details

E-file now with TaxBandits and securely file your Form 1099-K to the IRS!

6. When is the Deadline to File Tax Form 1099K?

The deadline to file Form 1099-K will slightly vary from other IRS 1099-series forms and based on the filing type you choose to file the form to the IRS.

Filing Type Due Date
Sending Recipient Copy January 31, 2022
By IRS e-filing method March 31, 2022
By IRS paper filing method February 28, 2022

E-File Form 1099-K before the deadline to avoid last-minute rush & Late filing Penalties. E-File Now

7. What are the deductions in 1099-K?

The deadline to file Form 1099-k deductions are the expenses you can deduct from your business income when you receive credit card payments reported on 1099-K.

Here are a few possible 1099-K deductions listed below

  • Internet access: Internet access for your established business entity can be deducted.
  • Advertising costs: If there’s a cost associated with marketing your business, you can deduct this to reduce your taxable income.
  • Web hosting fees: If you have to pay an annual web hosting fee for your online shop on the web, you can deduct this.
  • Home office: The deduction applies to small business owners who use part of their home exclusively and regularly for trade or business purposes.
  • Credit card or merchant processing fees: These can be deducted if you pay the credit card company processing fees.

8. Who sends Form 1099 K to the IRS?

Generally, the responsibility of transmitting Form 1099-K to the IRS lies with the third-party payment processors and credit card companies. They must report the transactions through filing Form 1099-K with the IRS, and the small business owners will receive a copy of the form either electronically or through the mail.

9. How to File Form 1099 K Electronically with TaxBandits?

TaxBandits supports e-filing of Form 1099-K for the 2021 tax year!

File form 1099-K with TaxBandits by following the steps provided below

  • Step 1: Sign in to your TaxBandits account
  • Step 2: Enter Filer Details
  • Step 3: Enter Payee Details
  • Step 4: Review the Form 1099-K for errors, if any
  • Step 5: Transmit the form to the IRS
  • Step 6: Recipient Copy (Postal or online access)

Your form 1099-k will be transmitted to the IRS, and you will get instant notification once it gets accepted or rejected by the IRS.

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