Overview of 1099-K Form Information and FAQs

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Note: YapStone, Inc. and its affiliates do not provide tax, legal, or accounting advice. This article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

For more help regarding your taxes, please consult your tax advisor. For more information regarding 1099-Ks and income taxes please visit www.IRS.gov.

Overview

The Housing and Economic Recovery Act of 2008 created a requirement for banks and other payment settlement entities (PSE) to report payment card and third-party network transactions for their merchants to the Internal Revenue Service (IRS). As part of the PSE’s reporting obligation, the PSE must collect and verify their merchant’s tax filing information, including legal name, address, and tax identification number (TIN). The PSE is also obligated to back-up withhold (currently 24%) from their merchant’s processing volume, unless their merchant certifies that the merchant is not subject to back-up withholding.

In order to comply with IRS requirements, a PSE, such as YapStone, Inc. (YapStone) is required to collect a valid W-9 from its merchant. The W-9 contains the merchant’s legal name, address, TIN, and a certification that the merchant is not subject to back-up withholding.

With the information collected on the W-9, YapStone is able to issue a 1099-K to its merchant. As required by the IRS, an information copy of the 1099-K details is sent to the IRS.

If a merchant fails to provide its correct TIN or legal name or there is a discrepancy between the information the merchant provided to YapStone and the IRS’s records, the IRS may require YapStone to begin backup withholding of the merchant's future settlements amounts.

For more information, you may visit the IRS website at www.IRS.gov or read the 1099-K instructions here: https://www.irs.gov/pub/irs-pdf/i1099k.pdf.

Issuing 1099-K forms to our Merchants

YapStone will issue its eligible merchants (you) a 1099-K every year for the previous calendar year. The 1099-K will report your gross payment volume. In order to be eligible to receive a 1099-K from YapStone, you must meet one or more of the following:

  • You or your business processed more than $20,000 AND 200 transactions in gross payments
  • You or your business (including properties) are in Massachusetts and processed more than $600 in gross payments
  • You or your business (including properties) are in Vermont and processed more than $600 in gross payments

W9 Form Required by YapStone

YapStone requires its merchants to submit a valid W-9 form (Request for Taxpayer Identification Number and Certification) in order to collect the merchant’s legal name, address, TIN and certification that the merchant is not subject to backup withholding.  If YapStone does not have a valid W-9 form we will use the information you provided at the time of your application.

What is a Federal “TIN” or Tax Identification Number?

A Federal “TIN” or Tax Identification Number is an identification number used by the IRS in its administration of tax laws. If you are a sole proprietor, generally, your TIN is your Social Security Number (SSN). For other business types, your TIN is your Employer Identification Number (EIN). It is critical that the TIN YapStone has on record matches what is on file with the IRS. If YapStone is unable to validate the TIN you supply against IRS records, you may be subject to a 24% withholding on your gross payments received until YapStone receives a TIN from you that can be validated against the IRS’s database.

Information Provided on a 1099-K form

Form 1099-K (Payment Card and Third-Party Network Transactions) is an IRS information return used to report certain payment transactions to improve voluntary tax compliance. Generally, the 1099-K includes the gross amount of all reportable payment transactions. A reportable payment transaction is defined as a payment card transaction or a third-party network transaction.

For further information on the 1099-K form please visit: https://www.irs.gov/businesses/understanding-your-1099-K

Common FAQs

What is the purpose 1099-K reporting?

How is the “gross amount” defined on the 1099-K?
Why is the 1099-K amount so much higher than the amount of my deposits for the year?
How is "Legal Name” defined?
What if my TIN or Legal Name is different than what the IRS has?
What do I do with the information on Form 1099-K?
What do I do if I think my Form 1099-K is incorrect?
You’ve issued the 1099-K form to me as an individual, but I have separate LLCs set up for my listings/properties.
You’ve issued my 1099-K to my LLC, but my LLC was not set up until June 30 of last year.  I need the volume split between my SSN and my LLC’s EIN.
I don’t want a 1099-K, I already report my income to the IRS – why do you need to report as well?

 

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