In the US, you need to report your income received from third-party payment processors to the IRS through IRS Form 1099-K. That means all the money that you make through online payments, credit cards, or digital platforms like PayPal or Stripe, you need to report it or you will face penalties and audits. Let’s understand all about IRS Form 1099-K.
What is Form 1099-K?
Form 1099-K is a tax document. It is used to report money you earn through online payment services or credit card transactions. Following use Form 1099-K to report their income:
- Freelancers
- Small Business Owners
- Anyone Selling Products or Services Online
Furthermore, if you have received payments through platforms like eBay, Etsy, Amazon, PayPal, Venmo, Stripe, or Square, you need to file this form.
Who needs to file form 1099-K?
You will need to file form 1099-K if you made over $600 from third-party payment processors. This has been applicable for 2024.
Before 2024, the limit for Form 1099-K was $20,000 and 200 transactions, but now, even one transaction of $600 or more makes it mandatory to file form 1099-K.
How to report 1099-K Income on Your Taxes?
Step 1: Check the Form
The first step is to look at the total earnings and make sure it matches your records and then download the form.
Step 2: Add it to your Tax Return
- If you’re self-employed or a freelancer, report it on Schedule C (Profit or Loss from Business) of Form 1040.
- If you run a registered business, include it in your company’s tax filing.
Step 3: Deduct Expenses
To reduce the tax amount you owe, you can deduct the expenses like:
- Payment processing fees (PayPal or Stripe fees)
- Advertising costs
- Office supplies
- Internet bills
Step 4: Keep Records in Good Manner
Once you file your Form 1099-K, the last but not least step is to keep track of your invoices, receipts, and payments so you can defend your tax return if the IRS asks questions.
FAQs about Form 1099-K
What if I don’t receive a 1099-K but I made money online?
You will need to report your income even if you made money online and didn’t receive 1099-K.
What happens if I don’t report my 1099-K income?
If you don’t file your 1099-K income, you will receive a notice, face penalties and they may even audit your tax return.
Can I get multiple 1099-K Forms?
Yes, If you use different platforms (like PayPal, Stripe, and Square), you may get multiple forms. Add them all together when filing your taxes
Moreover, If you want any other guidance relating to LLC Tax filing Returns in USA, USA company compliance or Company Registration in USA, please feel free to talk to our business advisors at 8881-069-069 .
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