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 28%) 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 ever 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 have processed, in a calendar year, gross payment volume exceeding $20,000 AND over 200 transactions.

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.

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 28% 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

FAQs

Q: What is the purpose 1099-K reporting?

A: The IRS requires 1099-K reporting to increase voluntary tax compliance. The 1099-K form contains informational reporting only.

Q: How is the “gross amount” defined on the 1099-K?

A: Gross amount is defined as the total dollar amount of aggregated transactions in which a payment card is accepted as payment for each merchant without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.

In other words, the “gross amount” contains all amounts YapStone processed for you and does not exclude any refunds, fees, or other adjustments.

Q: Why is the 1099-K amount so much higher than the amount of my deposits for the year?

A:The 1099-K reports gross amounts. The amount does not include any refunds, fees, or other adjustments. The Gross amount figures are counted at the date of sale/booking, not at the date of deposit.

Q: How is “Legal Name” defined?

A: Your "legal name" is the name you use to file taxes. If you requested a EIN from the IRS, the legal name is the name you provided to the IRS filed on Form SS-4. The Legal Name you give YapStone should match what is on file with the IRS.

Q: What if my TIN or Legal Name is different than what the IRS has?

A: In accordance with IRS guidelines, if YapStone does not have your correct Federal Tax Identification Number and Legal Name (as on file with the IRS), your payments may be subject to backup withholding. The current federal withholding amount is 28%.

Q: What are the eligibility requirements to receive a 1099-K from YapStone?

A: Merchants eligible to receive a 1099-K from YapStone are those who have processed more than 200 transactions AND $20,000 in volume per calendar year. 

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

A: The Form 1099-K is an information return. Use this information return in conjunction with your other tax records to determine your correct tax liability.

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

A: 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, please contact us at accountmanagement@yapstone.com.

If you cannot get the 1099-K corrected, you may attach an explanation to your tax return.

Q: You’ve issued the 1099-K form to me as an individual, but I have separate LLCs set up for my listings/properties.

A: YapStone may be able to issue you multiple 1099-Ks provided a few requirements are met.

If your properties are operated by different LLCs with separate EIN and the payments are deposited into separate bank accounts in the names of the applicable LLCs, YapStone can issue you separate 1099-Ks. In order to do so, you must submit a W9 form for each of the separate LLCs. Once the W9s are received, YapStone will validate the information and update our records. YapStone will then check to see if any of the LLCs individually have gross payment volume that cross the 1099-K threshold and issue 1099-Ks to any LLC that is eligible to receive a 1099-K. The original 1099-K that was issued to you as an individual will be voided.

If you do not meet the requirements outlined above, please consult with your accountant as you may be able to issue 1099-Ks to your LLCs.

Q: 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.

A: YapStone may be able to issue you multiple 1099-Ks provided a few requirements are met.

If your property changed ownership (even if you ultimately remained the owner of the LLC), YapStone will require proof of the change of ownership and W-9s for both the prior and current owners. If YapStone receives these documents and the payments were deposited into the bank account of the respective owners during the applicable timeframe, YapStone can issue two 1099-Ks that split the payment volume for the calendar year. Such 1099-K will report volume as such:

  • Volume from 1/1 – 6/30: Your SSN
  • Volume from 7/1-12/31: Your LLC’s EIN

Q: I don’t want a 1099-K, I already report my income to the IRS – why do you need to report as well?

A: As a payment processing entity (PSE), YapStone is required by the IRS to report gross sales volume for any merchant processing more than 200 transactions AND $20,000 in volume per year. You can think of the 1099-K like the W-2 that your employer issues to you and reports to the IRS every year. Informational reporting is the IRS’s method of encouraging increased voluntary tax compliance.

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