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If you're not a platform or marketplace and accept payments with Stripe, read more about receiving a 1099-K.
What is a 1099-K form?
The 1099-K is a tax information form generally used to report payments transactions. When using a 1099-K for information reporting, a copy must be delivered to the payment recipient and filed with the IRS.
Who files a 1099-K form?
A Payment Settlement Entity (PSE) is an organization that facilitates payments between parties for payment cards or third party payment networks. There are two types of PSEs:
Merchant Acquiring Entity (MAE) a merchant acquiring entity is a bank or other organization that has the contractual obligation to make a payment to a merchant in settlement of a payment card transaction.
Third-Party Settlement Organization (TPSO an organization that has the contractual obligation to make payments of third party network transactions, often handling payments between someone providing goods/services and the purchaser.
Who receives a 1099-K?
Recipients of a 1099-K are mostly merchants who have received payment using a TPSO or third-party payment network. An Etsy seller, for example, would receive a 1099-K from Etsy. Whether the recipient receives a 1099-K or not, they are still required to include that payment information in their income tax filings.
Typically, companies are only required to send 1099-Ks when the gross amount of total reportable payments exceeds $20,000 and the total number of such transactions exceeds 200 in a calendar year.
Deadlines and extensions
Please note: The deadlines in this article were for the 2020 filing season. This page will be updated shortly with deadlines for the 2021 filing season.
The deadline to report 2020 tax forms to the IRS is March 1, 2021 if paper filing or March 31, 2021 if e-filing. The deadline to provide 2020 tax forms to the recipient is February 1, 2021.
Companies that need more time to file 1099-Ks to the IRS can submit the IRS Form 8809 to apply for an extension. If more time is needed to deliver the 1099-Ks to the recipents, a letter to the IRS is required to explain the reasons for delay. Extensions must be requested before the original due dates.
Read more about extensions here
State filing considerations for 1099-K
Keep in mind that states may also have requirements and separate deadlines for reporting 1099-Ks and filing them. We recommend consulting a tax advisor to determine your state filing requirements.
Mailing vs. e-filing with the IRS
Anyone issuing more than 250 1099 forms is required to e-file with the IRS. Even if fewer than 250 forms are being filed, it is acceptable to e-file.
IRS penalties ranging from $50 to $270 per form may apply for each instance where you:
Don’t file an information return with the IRS by the deadline
Don’t provide the recipient a statement by the deadline
Don’t report a Taxpayer ID (TIN)
Report an incorrect TIN
Report incorrect information
Don’t provide the recipient with all required information
Don’t e-file with the IRS when required to e-file
Larger penalties may be enforced where there is evidence of intentional disregard or neglect.
This article is neither legal advice nor tax advice. We recommend that you speak to your tax advisor with any questions or concerns around tax reporting.