A Problem Deferred: 1099-K’s

This year sees the introduction of Form 1099-K. This form reports merchant and third-party payments you’ve received. We were supposed to note these on separate lines on our tax returns, but not any longer:

For tax year 2011 the IRS has deferred the requirement to separately report the amount of merchant card and third party network payments from Form 1099-K on your tax return. Instead, you should report all gross receipts of your trade or business as usual on the line indicated….

While I took this from a notice regarding Form 1040s, the same holds true for all tax returns. Everyone ignores the 1099-K’s…but the credit card and merchant service companies must continue to send them.

Last year I participated in a roundtable at my professional society regarding the 1099-K. The problems we foresaw were numerous; two of the most obvious were that accounting software normally tracks by product or type of product sold, and not by payment type and the issue of fiscal years (the 1099-K’s will all be on calendar years so the forms will be wrong for fiscal year clients). We found numerous other issues, and it appears the IRS realized that the 1099-K is not yet ready for prime time.

Still, it’s just a problem that’s been deferred until next year.


3 Responses to “A Problem Deferred: 1099-K’s”

  1. Daniel says:

    What if you are not a business, but just sold a lot of stuff last year? Do I not have to file the 1099-k on my return? I don’t really have any cost of goods as most of what I sold was just personal stuff I was scaling back. I ended up getting one because of the cost of shipping, fees, and supplies were costly. I probably didn’t really make anything, but how can I even file such thing. I don’t really sell anything now on eBay for this year, so did I luck out on having to worry about? I don’t understand the deferred deal, sounds like they are just collecting information and not requiring that 1099-k to be filed with your return. Is that correct?

    • Russ says:

      You do need to report all of your income, including credit card sales. You likely need to file a Schedule C for your sales activity; you would be able to deduct your cost of goods sold and your expenses such as shipping. Your tax professional should be able to assist you in completing the necessary tax paperwork.

  2. […] As I noted last week, the problem of entering 1099-K’s for recipients of those forms was deferred until 2012. It turns out that the IRS acquiesced to complaints from tax professional and other groups, including the Retail Industry Leaders Association (RILA). In a letter to the RILA, Steven Miller, Deputy Commissioner of the IRS stated, This is to confirm what I stated in our recent meeting with your organization and other industry representatives. There will be no reconciliation [of Form 1099-K's] required on the 2012 form, nor do we intend to require reconciliation in future years. Our intention is that the reporting of gross receipts and sales on the 2012 income tax forms will be modeled on the 2010 income tax forms. No other changes to these forms related to payment card reporting are contemplated. […]