What’s the Deal With the 1099K?
There’s a rumor around the world of ecommerce, and it’s a particularly scary one. Seems there’s a new tax form around town, and it’s running around scaring all the locals. Women gasp in terror and men wet their pantaloons at the mere mention of the thing.
Children just scratch their head – but what do they know about truly scary things like taxes?
What is this terrifying monstrosity called? It goes by many names. Sometimes it’s known as the 1099K, other times they call it the PayPal 1099; some who have already experienced it call it “that thing that ruined my life.” This tax form is nasty, and it’s here to stay!
Like a late night horror movie that jolts your nerves at midnight but falls apart like tissue paper come first daylight, the reality of the 1099K is much more boring than it seems. Seems people freak out when they hear the words “new tax form” and assume the worst…not that we blame them, of course!
The new tax form isn’t just for everybody. There are a few criteria you must meet before you get the 1099K in the mail. Otherwise, it’s just business as usual. To get the 1099K, you must:
- Use a payment processor like PayPal or Amazon to receive payments online
- Have made 200 or more online through PayPal/Amazon/etc.
- Have made over $20,000 with those 200 transactions
If you don’t fit these three stipulations, then you won’t be getting the new tax form. If you do, not all is lost!
Showing Good Form
So why is the IRS messing with a good thing and creating brand new documents for you to stress over? Well, for one, they’re technically not new – the legislation that created the new form 1099K actually passed way back in 2008. Seems a lot of ecom sellers weren’t paying their way when it came to taxes, as there was no reliable way to report funds made.
So in 2008, a housing development bill was passed through. Attached to this bill was the 1099K – a way for the IRS to track how much sellers were making through major sites like Amazon and PayPal. They hope that this will offset the “tax gap” that was growing since ecommerce was becoming such a big deal.
So what’s on this thing? Well, like a W2, it shows just how much you made over the last year. That’s really it – you have to figure out how much to take out in deductions and expenses for your business yourself. It’s pretty much a form to tell you exactly what you already know!
So when you get the 1099K in the mail, don’t freak out. Just use it as a tool to get your taxes done in a timely manner so you can spend more time doing what you do best – selling!