Beginning in January 2012, “payment settlement entities” (PSEs); including “merchant acquiring entities” such as banks that handle credit card transactions and “third party payment processors” such as PayPal, Amazon, and eBay Inc., are required to file Form 1099-K, Merchant Card and Third Party Network Payments, with the IRS and payees reporting the aggregate gross amount of transactions for the 2011 tax calendar from credit cards, debit cards and gift cards. The new reporting requirement was created as part of the Housing and Economic Recovery Act of 2008 to increase compliance in reporting sales income by merchants.
Under the new legislation, payment service providers will be required to submit 1099-K forms to the IRS for sellers with more than $20,000 in annual sales and more than 200 transactions during the calendar year.
The IRS has not yet released the final forms, preorder today and forms will ship upon availability.
1099-K Form Changes for Tax Year 2012
Type of transactions—Two check boxes have been added to indicate the type of transactions being reported, either payment card or third party network transactions.
Number of purchase transactions—Box 3 is now used to report the number of purchase transactions. Providing this information for tax year 2012 is optional.