IRS 1099-K Answer

[Uncle Pete]

I wrote to the IRS and here's the answer. Started a topic so someone might find it in the future, not lost under something else. 

This communication is in response to your questions below on Form 1099-K, Payment Card and Third Party Network Transactions.  Separate reporting of Form 1099-K transactions is not required on the tax return. The Form 1099-K is an information return that reports the gross amount of payment card and third party network reportable transactions for the calendar year to the IRS.  The form should be retained for your records and used in conjunction with your other tax records to determine your correct tax.  You should follow the return instructions on the form you are completing to report your gross receipts or sales. You should report items that qualify as a trade or business expense on the appropriate line item of Schedules C, E and F.

Payors who have questions about the Form 1099-K, may call the IRS at 1-866-455-7438. Payees who have questions about the information on a Form 1099-K they have received should contact the filer, whose name appears in the upper left corner on the form.

Additional information on Form 1099K and other information documents can be found at:  http://www.irs.gov/Tax-Professionals/Third-Party-Reporting-Information-Center

I hope you find this information helpful. 

Repeat: Separate reporting of Form 1099-K transactions is not required on the tax return.

Hope that was helpful information in the world of so much disinformation.

[EmberMike]

Thanks for the info. Unfortunately I'm not convinced that this is accurate, even if it is coming directly from the IRS. Your info says that reporting of the form 1099-K is not required on tax returns, and yet a microstock photographer is currently working to defend himself against an IRS claim that he didn't pay enough in taxes precisely because of his not reporting this 1099-K.

To me, it sounds like the IRS is saying one thing and doing another. Maybe reporting 1099-K info really isn't required, but that doesn't mean that the IRS won't come after you anyway and force you to defend yourself against claims that you owe them back taxes.

My take-away from all of this is that there seems to be no way to fully protect yourself from the IRS claiming you owe money on income you already paid taxes on as a result of these 1099-K forms. And the best defense is to simply try and not fall under the reporting criteria. I'm working towards that goal by splitting my payouts between multiple payment services, check payments, and direct deposit/bank transfer where available.

[cthoman]

Thanks for the info. Unfortunately I'm not convinced that this is accurate, even if it is coming directly from the IRS. Your info says that reporting of the form 1099-K is not required on tax returns, and yet a microstock photographer is currently working to defend himself against an IRS claim that he didn't pay enough in taxes precisely because of his not reporting this 1099-K.

To me, it sounds like the IRS is saying one thing and doing another. Maybe reporting 1099-K info really isn't required, but that doesn't mean that the IRS won't come after you anyway and force you to defend yourself against claims that you owe them back taxes.

My take-away from all of this is that there seems to be no way to fully protect yourself from the IRS claiming you owe money on income you already paid taxes on as a result of these 1099-K forms. And the best defense is to simply try and not fall under the reporting criteria. I'm working towards that goal by splitting my payouts between multiple payment services, check payments, and direct deposit/bank transfer where available.

I guess I thought they used it as a trigger. If your reported income is vastly different (less) than what Paypal reports is coming into your account, then they might audit you. But, I assume that is the same with pretty much anything that looks suspicious or incorrect.

[Uncle Pete]

True EmberMike, it wouldn't be the first time that the IRS disagrees with the IRS.  Just that I wanted to get the actual IRS version, not someone on a website says a friend of a friend said he heard that someones Sister, once...

Want to force an audit, I know how to trigger one. Although most people would rather not. I have schedule this and that and C and others and itemize for some things like clothing allowance and expenses and yes I depreciate equipment. But that's why I pay an accountant. She reads all the books, takes the classes and what I pay her is less that what it saves me.