What’s this 1099-K and how does this affect 1099-MISC forms?
If you receive funds via a credit card, debit card or online payment providers (e.g. PayPal), you’ll most likely be receiving a 1099-K form this year.
The IRS is looking to collect from those who may not have reported all appropriate payments, especially those through PayPal. Merchant account providers and sites like PayPal will be sending the new Form 1099-K to their merchants.
How does this affect 1099-MISC forms and AccountEdge?
The IRS decided (a bit late) that the 1099-MISC form that is typically sent to some vendors should not include credit card, debit card, PayPal, etc. payments. If included, the party on the receiving end would likely be hit twice for the same payment.
At the end of next week, we’ll release an update to AccountEdge Pro 2012 that will help you to exclude these types of payments a bit easier. The Print 1099 function will be also updated so that it will automatically exclude payments from certain accounts; for example: a credit card liability account. You will be able to select which accounts to exclude payments from.
You’ll also be able to drill into each 1099 vendor, view payments and decide which, if any, to exclude. This is where it gets a little complicated. In AccountEdge, we can’t tell if a payment was made with PayPal or even a debit card. So you’ll need to drill into a vendor if you make payments to them via Debit, Credit or Paypal so that you can exclude those payments.
We’ve also made a few other changes to help make this process a bit easier, so be on the lookout for an update coming to AccountEdge Pro 2012 at the end of next week.
You can find a video covering the new 1099 Assistant here.
Does this affect my Schedule C?
Although the IRS is requiring the new 1099-K and changes to the 1099-MISC for 2011 tax year, they’ve decided not to require you to split out income by payment type on the new Schedule C.
Starting in tax year 2012 (not this coming April) you will likely be asked to split out your income based on payment method. (see box 1a on the 2011 Schedule C) The 1099-K would let you know the amount from those payment sources for box 1a. In the instructions for the 2011 Schedule C, you will notice that you are not asked to split out the 1099-K payments this year.
If you’re using a previous version of AccountEdge and plan on sending out some 1099’s, you may want to consider upgrading to AccountEdge Pro 2012 in order to obtain this updated Print 1099 functionality.
-Tom
