The 1099 form is “for information purposes” only. It does not matter whether you received a 1099 or not - you still must tally up all the money you earned during the year in your business. Remember - as far as the government is concerned, it’s your obligation to account for all the money you received in the course of your business. Don’t forget to include any cash payments you received, if the cash did not go into your bank account. That will simply help you determine how much money was paid to you. Also, check your bank records for your income there, in case you received checks or made other deposits. That will be your record of money you received via PayPal.
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Go into PayPal in the history section, and download the history from thru. Reconcile it against your bank records, for income tax purposes.įor more information, read: Fast Answers About 1099 Forms for Independent Workers. The lesson for recipients is: don’t just add up your 1099-MISC forms and 1099-K forms, to determine your reportable income. It’s quite possible you may not receive a 1099-K form at all, even though payments were sent to you via electronic means.īut you still are required to report all income you made. That’s because electronic payment services are only required to send 1099-K forms when the total amount paid through them is $20,000 and there were 200 transactions. You may not receive any 1099 form for some income. If you did, you’d be over-reporting your income. If you know that the 1099-MISC includes funds that you received via an electronic service or credit card, you will want to make sure you do not just add up the total of both forms. When preparing your tax return, go over all 1099-MISC and 1099-K forms you have received. Won’t it mean double counting that income? What if you receivea 1099-MISC for income you know was paid to you or your business electronically, such as via PayPal? And what if you also receive a 1099-K form from PayPal? Many self-employed entrepreneurs and unincorporated small businesses not only send out 1099 forms, but also receive 1099 forms. Now let’s step in the recipient’s shoes for a moment. For Payees, Will 1099-K and 1099-MISC Mean Double Reporting of Income? They just aren’t required to send a 1099-MISC,” she adds. “Businesses are allowed to issue 1099-MISC (and may do so) regardless of the way they make payment. Weltman confirmed that some businesses choose to send 1099s anyway. But there’s no penalty for sending 1099 forms if they turn out not to be required.
There are penalties for failing to send out 1099-MISC forms. That is the general consensus among accountants and tax professionals. If in doubt, it doesn’t hurt to send 1099-MISC forms to the businesses or independent contractors you paid $600 or more last year - even if you sent the payment via PayPal or used a credit card.
Instructions for IRS 1099-MISC form can be found here (PDF). The bank or other processor of the payments has the reporting obligation.” She confirmed that the IRS currently does not require 1099-MISC forms to be sent for payments made electronically.Īccording to Weltman, “The instructions to Form 1099-MISC say ‘Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.’ So payments made by a credit card, PayPal, or gift card (any payment constituting an electronic payment) means the payer doesn’t report the payments on Form 1099-K. We verified this information with Barbara Weltman, a tax expert and author of the JK Lasser’s Small Business Taxes books. Those electronic payment providers are required under certain circumstances to send out a different version of the 1099, called the 1099-K, instead. Instead, in the case of electronic payments, the credit card companies and payment companies will handle any required reporting. (The normal threshold for when 1099-MISC forms are required is when you’ve paid the recipient a total of $600 or more.)
That is the case even if you paid the recipient more than $600 last year. You are not required to send a 1099 form to independent contractors such as freelancers, or to other unincorporated businesses such as LLCs, if you paid them via PayPal or credit card. If my small business paid independent contractors or other businesses using PayPal or a credit card, must we send them a 1099-MISC form for federal income tax purposes? It concerns payments you made to vendors, independent workers and service providers via PayPal or credit card: Here’s a frequent question we get here at Small Business Trends. If you buy something through our links, we may earn money from our affiliate partners.
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