Many Americans have discovered the ability to make money working online from home. Now the Internal Revenue Service has taken notice as well. January 2012 will be the debut of the 1099-K form. Nicknamed the PayPal 1099, the form will help the IRS ensure that online sellers are paying the appropriate amount of taxes for their earnings if they are accepting merchant cards for payment or are using a third-party payment network. Examples of those networks are PayPal, Amazon Payments, and Google Checkout.
The IRS is requiring all payment networks to report how much each seller made through its service. Not every online seller who uses third-party networks will receive a 1099-K. The seller who meets these two requirements will be receiving one:
- Made $20,000 or more in 2011 through payment network transactions
- The $20,000 was made through 200 or more transactions
Sellers who receive the form will need to check the information to ensure it is correct. The tax paid should be on profit only and not the gross sales reported on the form. It is more important than ever that online sellers accurately and completely track every business expense. The 1099-K does not replace the 1099-MISC. If a seller qualifies to receive the 1099-K, he or she will receive it in addition to the 1099-MISC. The payment networks must send the 1099K to sellers by January 31, 2012.
If you have questions about how the new form applies to your business, you may find more information here or speak with an accounting professional.
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