Bookkeeping Tips

Credit Card Sales Need to be reported to the IRS (Small Firms and Self- Employed)

Form 1099-K is issued by payment card processors and other third parties to their payees—and to the IRS.
When a small firm or self-employed accepts credit cards, it uses a card processor to deposit the money, less its fees, in the business’s financial account. The processor is responsible for collecting payment from the customer.
Starting in 2022, payment processors must issue 1099-Ks to anyone paid more than $600 during the year (currently required only when 200 transactions totaling over $20,000 are processed for anyone by the processor)—and to the IRS.
The new rule applies to gig economy firms such as Uber and Airbnb and to processors such as PayPal, VISA and MasterCard.
The IRS estimates that about 80% of gig economy workers did not receive 1099-Ks under the old rules and so probably did not report those earnings to the IRS.
Many states have their own 1099-K requirements. Most match the federal ones and use copies of the federal 1099-K. But a few have their own filing thresholds and forms.
Because the new $600 reporting threshold is the same as the old 1099-MISC and 1099-NEC threshold, some payors might issue 1099-NECs instead of 1099-Ks.

From: American Institute of Professional Bookkeepers (VOLUME 16: Issue 27)


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