Selling online? Understand What Your 1099-K IRS Form Reports
Tue, 06/03/2014 - 1:42pm | by Helen Hoart
Tax season is here. For those of us who have our own businesses, it may well be the time we’re scrambling to pull all the paperwork together so that we can make sure we’re reporting accurately.
If you’re self-employed, you have probably received a 1099 MISC form from businesses that have paid you money. If you make sales online, payment processors like PayPal or eBay will send you a 1099-K form. It’s important to remember, the 1099 forms are sent to both contractor and the government. And that means Uncle Sam will have a record of how much you’ve made. That also means that they compare what you report with what businesses report about your earnings.
If you receive a 1009-K form, here are a few things that are important to note in the 1099-K instructions. The 1099-K form will only be sent to businesses that have over $20,000 in gross sales and over 200 credit/debit transactions,
Form Show Gross Sales
A key word to remember if any of these forms that report on your earnings is they report gross sales. In the case of PayPal for example, that means the fees PayPal charges are not taken out of gross sales. It’s also important to note if you charge for shipping, shipping will be recorded as revenue. Of course, you’ll want to offset that by the actual cost of shipping when you file your taxes. And if you don’t charge for shipping, you’ll want to list your shipping costs as an expense.
It’s important to record all your business expenses. These can include refunds, business supplies, and your home office. The IRS gets independent reporting from other sources about your gross sales and it’s up to you to show them the expenses you incurred that allowed you to make that money.