With IRC section 6050W in effect, some Form 1099 filing responsibilities have changed. While some payers will have less 1099-MISC filing responsibility, other payers will be responsible for complying with the new 1099-K requirements. The tax reporting rules of Section 6050W have been in effect since January 2011, so if you don’t already know, it’s important to determine where you fit in.
Entities required to file Form 1099-K include:
- Merchant acquiring entities – Institutions responsible for settling payment card payments to their participating payees. This is often a bank, while participating payees are merchants who accept the payment card for their services. The bank will report gross payments in excess of $600 to its participating payees and to the IRS on Form 1099-K.
- Third-party settlement organizations – Arrangements where participating payees have agreed to accept payment by having a third-party settlement organization transfer funds through its third-party network to the account of the participating payee. This arrangement includes online electronic payment facilitators. Third-party settlement organizations will report gross payments to their participating payees and to the IRS on Form 1099-K. Note: There is a de minimus exception for this type of organization consisting of $20,000 and 200 transactions per payee.
Reduced Reporting Requirements
New 1099-K reporting requirements cover many of the same payments for which 1099-MISC reporting was required. However, payments reportable on Form 1099-K are not required to be reported on Form 1099-MISC. To prevent duplicate reporting, the final regulations provide that payment card and third-party network transactions reportable under both Sections 6041/6041A and 6050W must be reported under Section 6050W (1099-K) and not Section 6041/6041A (1099-MISC).