Tuesday, June 28, 2011

New Form 1099-K

With the passage of multiple pieces of legislation that affects 1099 reporting I think it is important for business owners to know about a few changes. The first and most direct change that business owners will notice is that they have received a new type of 1099 in 2012 (for the 2011 calendar year). This form is a 1099-K. Not all businesses will receive this form, but all businesses whom receive payments from credit card companies, or paypal should expect this form.

The form 1099-K will show how much a business has received from credit card and/or pay pal sales during the calendar year. This is a new form required by the IRS. Business such as merchants, retailers, restuarants and any business that uses paypal to collect payment should watch for this form.

Business owners would be wise to review these statements and verify that they correspond to receipts from credit card sales. Finding discrepancies early is often the only way to receive an amended 1099 in a reasonable amount of time. For this reason, I would strongly suggest that business owners review these statements as soon as they receive them, and contact the reporting agent as soon as possible with any discrepancies. These discrepancies do not happen very often, but the effects can be devastating for small businesses.

This form will be another tool used to audit for unreported income, one of the worst types of audits for business owners to go through. Your business does not want an audit caused by a clerical error by a credit card company, be on the lookout for errors.

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