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Irs Amended Form

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Irs Amended Form

Irs amended form 18. Irs amended form   Alimony Table of Contents IntroductionSpouse or former spouse. Irs amended form Divorce or separation instrument. Irs amended form Useful Items - You may want to see: General RulesMortgage payments. Irs amended form Taxes and insurance. Irs amended form Other payments to a third party. Irs amended form Instruments Executed After 1984Payments to a third party. Irs amended form Exception. Irs amended form Substitute payments. Irs amended form Specifically designated as child support. Irs amended form Contingency relating to your child. Irs amended form Clearly associated with a contingency. Irs amended form How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. Irs amended form It covers the following topics. Irs amended form What payments are alimony. Irs amended form What payments are not alimony, such as child support. Irs amended form How to deduct alimony you paid. Irs amended form How to report alimony you received as income. Irs amended form Whether you must recapture the tax benefits of alimony. Irs amended form Recapture means adding back in your income all or part of a deduction you took in a prior year. Irs amended form Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Irs amended form It does not include voluntary payments that are not made under a divorce or separation instrument. Irs amended form Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Irs amended form Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Irs amended form To be alimony, a payment must meet certain requirements. Irs amended form Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Irs amended form This chapter discusses the rules for payments under instruments executed after 1984. Irs amended form If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. Irs amended form That was the last year the information on pre-1985 instruments was included in Publication 504. Irs amended form Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. Irs amended form Definitions. Irs amended form   The following definitions apply throughout this chapter. Irs amended form Spouse or former spouse. Irs amended form   Unless otherwise stated, the term “spouse” includes former spouse. Irs amended form Divorce or separation instrument. Irs amended form   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Irs amended form This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Irs amended form Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Irs amended form Payments not alimony. Irs amended form   Not all payments under a divorce or separation instrument are alimony. Irs amended form Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. Irs amended form Payments to a third party. Irs amended form   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Irs amended form These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Irs amended form ), taxes, tuition, etc. Irs amended form The payments are treated as received by your spouse and then paid to the third party. Irs amended form Life insurance premiums. Irs amended form   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Irs amended form Payments for jointly-owned home. Irs amended form   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. Irs amended form Mortgage payments. Irs amended form   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. Irs amended form If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. Irs amended form Your spouse must report one-half of the payments as alimony received. Irs amended form If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. Irs amended form Taxes and insurance. Irs amended form   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Irs amended form Your spouse must report one-half of these payments as alimony received. Irs amended form If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. Irs amended form    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. Irs amended form But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. Irs amended form Other payments to a third party. Irs amended form   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. Irs amended form Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Irs amended form Exception for instruments executed before 1985. Irs amended form   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Irs amended form A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Irs amended form A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Irs amended form   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. Irs amended form irs. Irs amended form gov/pub504. Irs amended form Example 1. Irs amended form In November 1984, you and your former spouse executed a written separation agreement. Irs amended form In February 1985, a decree of divorce was substituted for the written separation agreement. Irs amended form The decree of divorce did not change the terms for the alimony you pay your former spouse. Irs amended form The decree of divorce is treated as executed before 1985. Irs amended form Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Irs amended form Example 2. Irs amended form Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. Irs amended form In this example, the decree of divorce is not treated as executed before 1985. Irs amended form The alimony payments are subject to the rules for payments under instruments executed after 1984. Irs amended form Alimony requirements. Irs amended form   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Irs amended form The payment is in cash. Irs amended form The instrument does not designate the payment as not alimony. Irs amended form Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Irs amended form There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Irs amended form The payment is not treated as child support. Irs amended form Each of these requirements is discussed below. Irs amended form Cash payment requirement. Irs amended form   Only cash payments, including checks and money orders, qualify as alimony. Irs amended form The following do not qualify as alimony. Irs amended form Transfers of services or property (including a debt instrument of a third party or an annuity contract). Irs amended form Execution of a debt instrument by the payer. Irs amended form The use of the payer's property. Irs amended form Payments to a third party. Irs amended form   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Irs amended form See Payments to a third party under General Rules, earlier. Irs amended form   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Irs amended form The payments are in lieu of payments of alimony directly to your spouse. Irs amended form The written request states that both spouses intend the payments to be treated as alimony. Irs amended form You receive the written request from your spouse before you file your return for the year you made the payments. Irs amended form Payments designated as not alimony. Irs amended form   You and your spouse can designate that otherwise qualifying payments are not alimony. Irs amended form You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Irs amended form For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Irs amended form If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Irs amended form   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Irs amended form The copy must be attached each year the designation applies. Irs amended form Spouses cannot be members of the same household. Irs amended form    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Irs amended form A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Irs amended form   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Irs amended form Exception. Irs amended form   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Irs amended form Table 18-1. Irs amended form Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. Irs amended form Payments are not required by a divorce or separation instrument. Irs amended form Payer and recipient spouse do not file a joint return with each other. Irs amended form Payer and recipient spouse file a joint return with each other. Irs amended form Payment is in cash (including checks or money orders). Irs amended form Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. Irs amended form Payment is not designated in the instrument as not alimony. Irs amended form Payment is designated in the instrument as not alimony. Irs amended form Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Irs amended form Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Irs amended form Payments are not required after death of the recipient spouse. Irs amended form Payments are required after death of the recipient spouse. Irs amended form Payment is not treated as child support. Irs amended form Payment is treated as child support. Irs amended form These payments are deductible by the payer and includible in income by the recipient. Irs amended form These payments are neither deductible by the payer nor includible in income by the recipient. Irs amended form Liability for payments after death of recipient spouse. Irs amended form   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. Irs amended form If all of the payments would continue, then none of the payments made before or after the death are alimony. Irs amended form   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. Irs amended form Example. Irs amended form You must pay your former spouse $10,000 in cash each year for 10 years. Irs amended form Your divorce decree states that the payments will end upon your former spouse's death. Irs amended form You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. Irs amended form The death of your spouse would not terminate these payments under state law. Irs amended form The $10,000 annual payments may qualify as alimony. Irs amended form The $20,000 annual payments that do not end upon your former spouse's death are not alimony. Irs amended form Substitute payments. Irs amended form   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. Irs amended form To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Irs amended form Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. Irs amended form Example 1. Irs amended form Under your divorce decree, you must pay your former spouse $30,000 annually. Irs amended form The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Irs amended form Your former spouse has custody of your minor children. Irs amended form The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. Irs amended form The trust income and corpus (principal) are to be used for your children's benefit. Irs amended form These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Irs amended form Of each of the $30,000 annual payments, $10,000 is not alimony. Irs amended form Example 2. Irs amended form Under your divorce decree, you must pay your former spouse $30,000 annually. Irs amended form The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. Irs amended form The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. Irs amended form For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). Irs amended form These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. Irs amended form None of the annual payments are alimony. Irs amended form The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. Irs amended form Child support. Irs amended form   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. Irs amended form The amount of child support may vary over time. Irs amended form Child support payments are not deductible by the payer and are not taxable to the recipient. Irs amended form Specifically designated as child support. Irs amended form   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. Irs amended form A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. Irs amended form Contingency relating to your child. Irs amended form   A contingency relates to your child if it depends on any event relating to that child. Irs amended form It does not matter whether the event is certain or likely to occur. Irs amended form Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Irs amended form Clearly associated with a contingency. Irs amended form   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. Irs amended form The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. Irs amended form The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. Irs amended form This certain age must be the same for each child, but need not be a whole number of years. Irs amended form In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. Irs amended form   Either you or the IRS can overcome the presumption in the two situations above. Irs amended form This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. Irs amended form For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. Irs amended form How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. Irs amended form You must file Form 1040. Irs amended form You cannot use Form 1040A or Form 1040EZ. Irs amended form Enter the amount of alimony you paid on Form 1040, line 31a. Irs amended form In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). Irs amended form If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Irs amended form Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Irs amended form Enter your total payments on line 31a. Irs amended form You must provide your spouse's SSN or ITIN. Irs amended form If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. Irs amended form For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Irs amended form How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. Irs amended form You cannot use Form 1040A or Form 1040EZ. Irs amended form You must give the person who paid the alimony your SSN or ITIN. Irs amended form If you do not, you may have to pay a $50 penalty. Irs amended form Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. Irs amended form If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Irs amended form Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. Irs amended form The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Irs amended form Do not include any time in which payments were being made under temporary support orders. Irs amended form The second and third years are the next 2 calendar years, whether or not payments are made during those years. Irs amended form The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. Irs amended form When to apply the recapture rule. Irs amended form   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. Irs amended form   When you figure a decrease in alimony, do not include the following amounts. Irs amended form Payments made under a temporary support order. Irs amended form Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Irs amended form Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. Irs amended form Figuring the recapture. Irs amended form   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. Irs amended form Including the recapture in income. Irs amended form   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Irs amended form Cross out “received” and enter “recapture. Irs amended form ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. Irs amended form Deducting the recapture. Irs amended form   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Irs amended form Cross out “paid” and enter “recapture. Irs amended form ” In the space provided, enter your spouse's SSN or ITIN. Irs amended form Prev  Up  Next   Home   More Online Publications
 
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General FAQs on Payment Card and Third Party Network Transactions

I received Form 1099-K. How do I report it on my tax return?

Separate reporting of these transactions is not required. However, you should follow the return instructions on the form you are completing to report your gross receipts or sales. You should report items that qualify as a trade or business expense on the appropriate line item of Schedules C, E and F.

What is a participating payee?

A participating payee is:

  • Any person who accepts a payment card as payment, or
  • Any person who accepts payment made by a third party settlement organization on behalf of the purchaser or customer.

Why is this reporting necessary?

This reporting is required by law. Third party information reporting has been shown to increase voluntary tax compliance and improve collections and assessments within IRS.

How are reportable transactions to be reported to IRS?

Gross payment card and third party network transaction amounts are reported on the Form 1099-K, Payment Card and Third Party Network Transactions.

What information must be reported on the Form 1099-K?

The gross amount of reportable payment transactions for the calendar year and its corresponding months are required to be reported for each payee. The reporting of both annual and monthly amounts is necessary to resolve differences between information returns and tax returns of fiscal year filers. The name, address and taxpayer identification number of each participating payee must also be included on the form.

When are Forms 1099-K due?

Information reporting for payment card and third party network transactions is due to the IRS on the last day of February of the year following the transactions. If filing electronically, it is due the first day of April of the year following the transactions.

May Forms 1099-K be filed electronically?

Yes. Those required to file may do so through the FIRE (Filing Information Returns Electronically) system. If a payment settlement entity has more than 250 individual information returns to file in any calendar year, they all must be submitted electronically. Existing users may log into FIRE. New users may create an account and test their file before submitting.

For more information, review Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. If you are considering filing on paper, review General Instructions for Certain Information Returns.

What are payee statements and when are they due?

Every payment settlement entity required to file a Form 1099-K must also furnish to each participating payee a written statement with the same information reported to the IRS. The statements must be furnished to the payee by January 31 of the year following the transactions.

May payee statements be furnished to participating payees electronically?

Yes. With the participating payee’s prior consent, payee statements may be provided electronically. This consent may be granted electronically. (See Treasury regulations section 1.6050W-2 for instructions for receiving consent from payees.) If a payee statement is furnished electronically, an email address for the reporting entity may be provided in lieu of a phone number.

Is there a de minimis exception for Forms 1099-K by third party settlement organizations?  

There is a “de minimis” exception from reporting for a third party settlement organization with respect to third party network transactions. If payments to a participating payee exceed $20,000 and exceed 200 transactions within the calendar year they must file for that participating payee.

Does the de minimis exception described above apply to payment card transactions?

No. The “de minimis” exception does not apply to payment card transactions settled by merchant acquiring entities.

What constitutes the "gross amount" of reportable transactions?

The "gross amount" of reportable transactions means the total unadjusted dollar amount of aggregate payment transactions for each participating payee.  

Are foreign payment settlement entities subject to the reporting requirements?

Yes. The statute and regulations establish that a "payment settlement entity" may be a domestic or foreign entity.

Are payment settlement entities required to report the transactions of governmental units, whether state or federal?

Yes. The term "participating payees" includes any governmental unit.

What is payment card and third party network reporting?

Under section 6050W of the Internal Revenue Code, payment settlement entities (merchant acquiring entities and third party settlement organizations) must report payment card and third party network transactions. This reporting requirement began in early 2012 for payment card and third party network transactions that occurred in 2011.

Are purchases made with stored-value cards or gift cards reportable transactions?

It depends.

  • Purchases are not reportable when the card is accepted as payment by the issuer or someone who is related to the issuer of the card (such as a subsidiary company or the company itself). Under these circumstances, the stored-value cards do not fit the definition of a "payment card" and purchases made with such cards are therefore not reportable. 
  • Purchases are reportable when the stored-value card is accepted by a network of persons unrelated to the issuer and each other.

For the definition of unrelated person see section 267(b) of the Internal Revenue Code, including the application of section 267(b) and (e)(3), or section 707(b)(1).

If transactions are already reportable on other information returns, must they be reported again by payment settlement entities?

No. If a transaction is reportable by a PSE both under section 6041 or section 6041 A(a) and under section 6050W, the transaction must be reported on a Form 1099-K and not a Form 1099-MISC.

If a worker at a trade or business is an independent contractor, and the independent contractor swipes payment cards on behalf of the trade or business in the normal course of business (in other words, the trade or business, not the independent contractor, receives the proceeds), should the trade or business report payments to the worker on Form 1099-K or Form 1099-MISC?

In this situation, the trade or business should continue to report payments made to independent contractors on Form 1099-MISC as they have done in the past. However, the business will receive a Form 1099-K for these payment card transactions from the payment settlement entity.

How can payee TINs be verified?

Verification of payee TINs is done through the Taxpayer Identification Number (TIN) Matching Program.   

For further information please visit General Instructions for Certain Information Returns - Introductory Material or call 1-866-255-0654.

Can the entity responsible for filing Form 1099-K contract with a third party to prepare and file these returns?

Yes. However, the entity responsible for filing (i.e., the entity that submits the instructions to transfer funds) is liable for any applicable penalties under sections 6721 and 6722 if the reporting requirements are not met. In addition, the name, address and Taxpayer Identification Number of the entity responsible for filing must be reported on the Form 1099-K in the box for the filer's information.

What is Form 1099-K?

The Form 1099-K, Payment Card and Third Party Network Transactions, is an information return that reports the gross amount of reportable transactions for the calendar year to the IRS.

If you receive a Form 1099-K, you should retain it for your records and may use it to assist you in completing your tax returns.

I filed Form 1099-K last year. What changes will I see on my 2013 Form 1099-K?

IRS modified calendar year 2013 Form 1099-K to improve compliance effectiveness. These changes include:

  • Box 3 (Number of payment transactions) is no longer optional for calendar year 2013 and should reflect the number of purchase transactions (not including refund transactions) processed through the payment card or the third party network.
  • Box 4 (Federal income tax withheld) was added to reflect amounts that may have been withheld by the payer, such as backup withholding. The recipient of the Form 1099-K should include this amount on their income tax return as tax withheld.
  • Boxes 6, 7 & 8 were added to be consistent with other information returns and reflect the State, State ID Number and State Income Tax Withheld, respectively.

What are payment settlement entities?

A payment settlement entity is an entity that makes payment in settlement of a payment card transaction or third party network transaction. Payment Settlement Entities are often referred to as “PSEs” and can take one of two forms:

  • Merchant Acquiring Entity: A bank or other organization that has the contractual obligation to make payment to participating payees in settlement of payment card transactions
  • Third Party Settlement Organization: The central organization that has the contractual obligation to make payment to participating payees of third party network transactions

If I use a payment card (or a third party settlement organization) to pay for a purchase, do these payment card reporting rules affect me and will I receive a Form 1099-K?

No. Individuals will not receive a Form 1099-K for making a purchase. These provisions affect only businesses or entities that accept payment cards or use third party network settlement organizations for payment of goods or services.

Do payment settlement entities adjust the "gross amount" to account for fees, refunds, charge-backs or other costs and refunded amounts?

No. The "gross amount" is the total unadjusted dollar amount of the payment transactions for a participating payee. This amount is not to be adjusted to account for any fees, refunds, or any other amounts.

What do I do with the information on Form 1099-K?

The Form 1099-K is an information return. Use this information return in conjunction with your other tax records to determine your correct tax. To get further information on record keeping, check out Publication 552, for individuals or Publication 583, Starting a Business and Keeping Record.  

How will IRS use the data?

The IRS will use the data from the Form 1099-K to develop:

  • Taxpayer education and outreach products and services.
  • New examination and collection approaches.    

What do I do if I think my Form 1099-K is incorrect?

If you believe the information on a Form 1099-K is incorrect, the form has been issued in error, or you have a question relating to the form, contact the filer, whose name appears in the upper left corner on the front of the form.

Or you may contact the payer, or PSE, whose name and phone number are shown in the lower left corner of the form. If you cannot get this form corrected, you may attach an explanation to your tax return and report your income correctly.

To get the further information on Information Returns, check out the General Instructions for Certain Information Returns.

Where can I call if I have a question on the Form 1099-K?

Payors who have questions about the Form 1099-K itself, may call the IRS at 1-866-455-7438. Payees who have questions about the information on a Form 1099-K they have received should contact the filer, whose name appears in the upper left corner on the form.  

I own a small business and also have a not-for-profit hobby. I do not accept payment cards for payment for either, but I do use a credit card and third party settlement organization to make purchases for both. Do the payment card reporting rules affect me?

No. The provisions for payment settlement entity reporting affect only those businesses or entities that accept these forms of payment for goods or services.

Since you do not accept these forms of payments, you will not receive a Form 1099-K for your sales.

Additionally, you will not receive a Form 1099-K for your purchases. Individuals and businesses only receive Form 1099-K for receiving payment for goods and services in reportable transactions.

I occasionally sell items on an Internet auction site and accept payment cards. How do the payment settlement entity reporting rules affect me?

If you accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of proceeds for the goods or services purchased from you through the use of a payment card in a calendar year. Further, if you accept payments from a third party settlement organization, you should receive a Form 1099-K from that organization only if:

  • The total number of your transactions exceeds 200 

AND 

  • The aggregate value exceeds $20,000 in a calendar year.

If I have a holiday craft business and accept payment cards for payments, how do the payment settlement entity reporting rules affect me?

If you are set up to accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of the proceeds for the goods or services purchased from you through the use of a payment card in a calendar year. Further, if you accept payments from a third party settlement organization, you should receive a Form 1099-K only if:

  • the total number of your transactions exceeds 200 

AND

  • the aggregate value exceeds $20,000 in a calendar year.

 

Page Last Reviewed or Updated: 20-Mar-2014

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