Here’s a quick primer on the key aspects of the 1099-MISC and 1099-K.
It’s that time of year again. Time to comb through your payments records and get everything organized for 1099-MISC reporting.
What many don’t realize is that if you make payments via “Payment Card and Third Party Network Transactions” including PayPal, make sure you exclude them from the 1099-MISC reporting. Why? Because PayPal or the Third Party Network will report them directly to the vendor on a 1099-K.
Otherwise, the rules for 1099-MISC haven’t changed. Any LLC or sole proprietor you pay $600 or more (excluding Third Party Network Transactions) should receive a 1099-MISC from you. The IRS rules can be found at this link.
The Third Party Network will provide a 1099-K if they received more than $20,000 and 200 transactions during the year. The IRS rules can be found at this link.
The interesting twist here is that if someone receives $1,000 in gross payments via PayPal or similar, it is possible they will receive neither a 1099-MISC from you nor a 1099-K from the payment network. PayPal says: Only those customers that meet the 1099-K eligibility requirements will see the 1099-K. It is possible, out of an abundance of caution, that PayPal will still send a 1099-K.
Disclaimer: this article should not be construed as advice on how to avoid reporting income to the IRS. It is still your responsibility to report all income to the IRS regardless of whether you receive a 1099 or not.
