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By liam    Posted on 05-11-2019    97 Views    38 Downloads     automated teller mac, money, transparent, tmc

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In the United States, Form 1099-K 'Payment Card and Third Party Network Transactions' is a variant of Form 1099 used to report payments received through reportable payment card transactions (such as debit, credit, or stored-value cards) and/or settlement of third-party payment network transactions. Form 1099-K is sent out to payees by a payment settlement entity (such as a bank) if there are more than 200 such transactions and the gross payments exceed $20, 000. This threshold will be reduced in 2022 to $600 with no minimum number of transactions. Reportable payment card transactions do not include ATM withdrawals or checks issued in connection with a payment card. Examples of individuals who would receive Form 1099-K include freelancers compensated via PayPal, Etsy sellers, Uber drivers who accept credit cards as payment, small businesses who accept card transactions as payment, and in general professionals who accept online or credit card payments for services. Motivation In 2006, Americans underpaid their taxes by $450 billion, equal to a 17% tax noncompliance rate. In response, the IRS has pushed for more third party information reporting. In the Housing and Economic Recovery Act of 2008, a new requirement was laid out for banks and credit card merchants to report payments to the IRS. This requirement took effect in 2011, and Form 1099-K was first issued in 2012. It uses third party information reporting (banks and credit card merchants) in order to increase tax compliance and improve IRS tax assessments. The new requirement specifically does much in the way of increasing tax compliance from independent contractors, especially with the increasing size of the so-called '1099 economy'. Filing Payment settlement entities must send Form 1099-K to the IRS by the last day of February of the year following the relevant transactions, or if filing electronically, by April 1. Form 1099-K may be filed electronically through the Filing Information Returns Electronically (FIRE) system.