- 1 what is a 1099 k form used for
- 2 what is a 1099 k form used for
- 3 Easy and Quick E-Filing of Form 1099 Online | E-file 1099
what is a 1099 k form used for
What is 1099 form for? Form 1099 is IRS form that is used to report various types of income other than wages, salaries, and tips. Form 1099-Misc is issued by your business to a subcontractor or anyone who provides services to you above a threshold during a calendar year. You will skip the 1099 if the provider of services is a corporation. Next we will discuss some 1099 preparation tips that you or your accounting/bookkeeping staff may need to know to issue this IRS tax form.
How to know if the providers of services are corporation?
Payments to corporation are not required to be reported on Form 1099-MISC. This exception is not apply to payments for legal service and medical or health care services.
In order to know if the providers of services are incorporated, you should hand them a form W-9 prior to paying for their services. The provider completes the W-9, by which they can be indicated if they’re a corporation and therefore not subject to receiving a 1099. The W-9 also gives you the tax ID number, without which you cannot file a 1099. This is why you ask for a completed W-9 prior to payment or prior to receiving services, to avoid the sort of conflicts wherein one party asks for the information in order to comply with the IRS regulations and the second party refuses to provide it, while they’ve already received their payment.
What do you do if a subcontractor refuses to provide a W-9?
If they refuse to provide the W-9 after receiving payment for a service, you issue form 1099-Misc with writing "Refused" in the Tax ID box of the form and send it off to the IRS and the subcontractor as usual. It's up to the IRS to deal with the subcontractor, but you've fulfilled your responsibility.
What if materials are included in what you paid to the service provider?
You can break those out, by completing the 1099 for only what the service was. However, you’re not required to if you have all costs posted to the same account in your accounting software and aren’t sure which are materials and which are services, send a 1099 for the entire amount. It’s the provider’s responsibility to deal with that on their own tax return, and it’s rather easily done.
You issue form 1099 to someone for the amount you physically paid them during the year. If they billed you another $100,000 but at year end it’s still on your books as a payable, it doesn’t count. That’ll be for next year.
You can order free 1099 forms from the IRS or buy the forms at the office supply store, and print them. Most accounting or payroll software have capability to print on the 1099 form. You can also file online with various providers who will mail the forms for you and efile with the IRS.
what is a 1099 k form used for
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The 1099-K is one of 15 different types of “information forms” the IRS uses to report payments facilitated between individuals (you may have received or heard of a 1099-MISC or W-2 which are also information forms). In the past few years, companies like Uber, Kickstarter, eBay, and others have started to use 1099-K forms to report payments facilitated on their online or mobile platforms. This article focuses on a 1099-K sent to individuals for facilitated payments (in the case you’re receiving a 1099-K from Uber, for example).
Uber uses 1099-Ks to report the fares you receive, because Uber technically functions as a third-party payment facilitator between you and your passengers.
Two key differences between a 1099-K different from a 1099-MISC
#1 - High Threshold: The threshold for receiving a 1099-K is if a company facilitated over 200 transactions on your behalf totaling more than $20,000. But because that threshold is so high, many companies will send a 1099-K even if you didn’t reach that threshold. Uber, for example, will issue 1099-Ks to drivers even if they haven’t reached this high threshold.
#2 - Gross Reporting: Companies using 1099-Ks are required to report gross transactions they facilitated. In the case of Uber, that means the fees and commissions that Uber takes out are included on the 1099-K form. (Rest-assured: You won’t have to pay taxes on company commissions or on any fees associated with working with that company! But, you’ll need to deduct commission and fees on the Schedule C).
How do I use this form when filing my taxes?
The most important box that you’ll use on this form is Box 1a - Gross amount of payment card/third party network transactions. This is the total you’ll use when calculating your business profit or loss on the Schedule C. This number will go on Part I, Line 1 of your Schedule C.
What if my 1099-K has a mistake?
First, make sure you’ve double-checked that the total reported equals the total amount the company processed. This means for Uber that you should add up all of their fees and the amount that was sent to your bank account. This should match what your 1099-K shows. If it doesn’t, reach out to the company quickly to have your form corrected.
Additionally if the IRS sends a notice about underreporting on your 1099-K form. Here’s what to do:
- Respond within the amount of time allowed in the letter
- Provide an explanation as to why you reported the amount of income on your Schedule C.
- If you filed your tax filing before the 1099-K was corrected provide that as your reasoning. It is best to not file your tax filing until the 1099-K is corrected.
- Seek a tax professional to help you through the process if you need further assistance.
Easy and Quick E-Filing of Form 1099 Online | E-file 1099
Published At: 2017-05-12 23:07
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What is Form 1099-K? What To Do With - Simply Taxes LLC
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