One new phenomenon that gained prominence during 2011 tax season is a new form called “1099-K”. Not to belabor the point, but I’ve received so many questions from clients so I’d like to offer a complete explanation to eliminate misconceptions about this form.
The Tax Act of 2008 is a law that requires companies that process credit cards to issue a 1099-K to each business that receives funds from those transactions. So anyone who sells products on eBay or Amazon.com, will receive a 1099-K. The Tax Act indicates that a 1099-K will be issued if gross sales are greater than $20,000 or there are more than 200 transactions. This also applies to those with PayPal accounts.
There are also several types of form 1099 that the taxpayer must be familiar with since the taxpayer could receive one or more of these forms–each reporting different types of income.
Here is a summary of the various types of 1099 forms:
1099-B, Brokerage firms generally use this form to report the sale, redemption or exchange of stock, bonds, certificates of deposit (CD’s) and debt instruments.
1099-DIV, lists all taxable dividends and capital gain distributions earned from stocks and mutual funds held in your account.
1099-INT, lists all interest earned on government and corporate bonds, short-term CD’s and cash in your brokerage account.
1099-OID, lists the original issue discount (OID) that may be reportable to IRS. It is the difference between the original issue price of a debt obligation and its redemption price at maturity.
1099-MISC, lists other reportable income, such as royalty payments and cancellation of debt
I hope this clarifies the issue. If you have additional questions about 1099-K or other tax related matters, please call me or comment on this post. Thank you.