US Form 1099-K is a tax form used by payment settlement entities to report payments that are made in settlement of third-party payment network transactions to the Internal Revenue Service (IRS) for the tax year.
This form is typically used to report income received by sellers on online platforms and other third-party payment networks, such as credit card companies and online payment processors like PayPal.
The form is issued by the payment settlement entity to both the seller — the recipient of the payments — and the IRS. The payment settlement entity is required to send a copy of the form to the seller if the seller meets certain criteria.
For example, sellers who receive payments above a certain dollar threshold are typically issued a Form 1099-K. Also, sellers who engage in a threshold number of transactions during the tax year may receive a Form 1099-K.
The purpose of Form 1099-K is to help the IRS ensure that sellers accurately report their income from third-party payment transactions.
By receiving a copy of the form from the payment settlement entity, the IRS can match the income reported on Form 1099-K with the income reported on the seller’s tax return.
This helps the IRS identify discrepancies and ensure that sellers are paying the correct amount of tax on their income.
Form 1099-K includes information such as the total gross amount of reportable payment transactions made to the seller during the tax year.
This amount includes both the gross amount of payment transactions and any adjustments for credits, cash reimbursements, or other amounts.
The form also includes the seller’s taxpayer identification number (TIN), the payment settlement entity’s name and TIN, and the number of payment transactions related to the seller during the tax year.