A seller will provide reports to the IRS using Form 1099-K, Payment Card and Third Party Network Transactions. This form is used to report the gross amount of reportable payment transactions for each participating payee. The following steps outline the process and requirements for providing these reports:
- Form 1099-K Filing Requirements:
- Gross Payment Reporting: The gross amount of reportable payment transactions by month and the calendar year must be reported for each participating payee. This includes the total unadjusted dollar amount of the payment transactions without adjustments for fees, refunds, chargebacks, or other costs.
- Payee Information: The name, address, and taxpayer identification number (TIN) of each participating payee must be included on the form.
- Filing Deadlines:
- Paper Filing: If filing on paper, Form 1099-K must be filed with the IRS by February 28 of the year following the transactions.
- Electronic Filing: If filing electronically, the form must be filed by March 31 of the year following the transactions.
- Electronic Filing:
- Forms 1099-K can be filed electronically through the Information Returns Intake System (IRIS) or the Filing Information Returns Electronically (FIRE) system. Entities required to file 10 or more information returns during the calendar year must file electronically.
- Payee Statements:
- Entities required to file Form 1099-K must also furnish a statement to the payee with the same information reported to the IRS. These statements must be provided by January 31 of the year following the transactions and can be furnished in paper format or electronically with the payee's consent.
- Backup Withholding:
- If a payment settlement entity has performed backup withholding under section 3406(a) for a payee during the calendar year, it must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee if total reportable payments to the payee exceeded $600 for the calendar year.
- De Minimis Exception:
- For third party settlement organizations (TPSOs), there is a de minimis exception from reporting if the gross amount of payments to a payee does not exceed $20,000 and the number of transactions does not exceed 200. However, for 2023, the IRS has delayed the implementation of the $600 reporting threshold, and the previous threshold of $20,000 and 200 transactions remains in place.
- Verification of Payee TINs:
- Verification of payee TINs is done through the Taxpayer Identification Number (TIN) Matching Program.
By following these steps and requirements, a seller can ensure that they are in compliance with the IRS reporting obligations for payment card and third party network transactions.
Sources:
IRS FAQ
IRS FAQ
IRS FAQ
IRS FAQ
FS-2024-3
FS-2023-27
FS-2023-6
