Starting with the 2011 tax year, all payment providers were to issue the 1099-K forms to businesses and to the IRS. The 1099-K forms indicated gross sales processed through the payment provider.
Under this new IRS rule online electronic payment processors (such as PayPal & Amazon) as well as any credit card provider were required to submit a 1099-K for every seller that processed more than 200 transaction in a year and totaled at least $20,000.
With the 2012 tax year being the second year of the new tax law taking affect, the IRS is expected to look very closely as online sellers of all sizes for any discrepancies in gross sales figures.
“Last year what they said was that it’s the first year of the form, so they weren’t going to use that data,” said Steven Aldrich, CEO of the Web-based bookkeeping service Outright.com. “Now they’ve said the first year’s under our belt, let’s go ahead and use this data to make sure the information’s accurate and complete.”
“They’re going to plan on using it this year to ensure that businesses are reporting their revenue accurately,” he added.
All online sellers should look closely at the 1099-K forms they receive to make sure there are not any errors on your end before you submit your tax form.