Ah, it’s everyone’s favorite time of the year… tax season.
Every year millions of Americans dread tax season, as they feel unsure of how to report their earnings. If you’re self-employed, the reporting process is even more grueling.
This is where the 1099-k comes in.
If you’re newly self-employed, you may not have even heard of the 1099-k form. Or, maybe you have used it, but you still aren’t quite sure what it’s for.
Regardless of where you’re at, if you find yourself asking “what is a 1099-k?” we have your back.
Keep reading to learn about what a 1099-k is and how you use it!
What is a 1099-k?
A 1099-k is an IRS information return for the purpose of reporting payment transactions.
The form includes the gross amount of all your reportable payment transactions. It’s defined as a payment card transaction or a third party network transaction. The minimum reporting threshold is any payment greater than $20,000 and more than 200 transactions through a third party network.
There are over 15 types of 1099 forms that companies can use to report the payments they have sent to individuals or companies. This is how the IRS knows how much money in taxes to expect in April. The 1099-k is meant to report payments between a company and an individual, or a company and another company.
How Should I Use the Information on My 1099-k?
The information you get from your 1099-k is important for tracking your business income.
All of the income you receive from your business must be reported on your 1099-k. It’s most common for payment to be in cash, check, or debit/credit card payments. These are typically known as “gross receipts” on your income tax returns.
Any other income that isn’t on your form 1099-k should be reported as well.
Reporting gross sales is not only important for legal reasons but reporting your gross sales gives you the opportunity to get deductions or returns.
Do You Still Need to Report Payments If You Haven’t Received a 1099-k?
Yes, you still have to report any funds you have raised to the IRS.
If you have made over $400 with your business or as an individual, you are liable to report the money you have earned. If you have both a W-2 and a 1099-k, that process will require a different method of reporting as well.
Check out ThePayStubs for more information on filing a W-2 and a 1099-k together.
What Should I Do When I Get My Form 1099-k?
Once you receive your form 1099-k, the first thing you’ll want to do is look it over for accuracy.
Make sure that your name, address, and SSN are all correct on the form. If the payments aren’t exact, don’t worry. The 1099-k is reporting the amount you were paid before any fees have been taken out.
Reading a 1099-K Just Takes Some Getting Used To
While learning about the 1099-k and understanding what it’s for may seem overwhelming, it just takes a little bit of research and practice.
If you find yourself struggling to understand the form even after researching, don’t be afraid to reach out to a tax accountant for help.
Now that you know the answer to your question, “what is a 1099-k?” check out our Lifestyle section for more useful information!