Get organized for Form 1099-K reporting
Sometimes an ounce of advance planning can save a ton of future work. That’s true in the tax world, too, even for something as simple as the information forms you’ll find in your mailbox at the beginning of 2013.
For example, if you accept credit cards from customers or payments from Internet payment processors, you may be expecting “Form 1099-K, Payment Card and Third Party Network Transactions.” Though the name changed, the form is much the same as the one you received last year. It will report the gross amount of your transactions, both to you and to the IRS.
While the IRS did not match these figures to your 2011 tax return, a recent announcement indicates a matching program is coming, possibly later in 2013. What can you do now to avoid problems then? One suggestion: Set up your bookkeeping system to track sales by type of payment.
Another advance planning point for Form 1099-K matching is to make sure the name on your merchant account is the same as the one on your tax return, which is linked to your federal employer identification number. The reason? Beginning January 1, 2013, banks and settlement companies issuing Forms 1099-K will be required to deduct “backup withholding” from your payments at a rate of 31% if there is an information mismatch.
Properly completing “Form W-9, Request for Taxpayer Identification Number and Certification,” can also help avoid backup withholding.
Contact Dye and Whitcomb if you need more information or filing assistance.