Got the 1099 K and wondering what to do with it? 1099 K is a tax form sent by online payment processing companies like PayPal, eBay and the like to report how much sales you made through them in the last calendar year. They fill your basic details with the last years gross sales and send this form to the IRS with a copy to you as well.
Well, I report my income and file my Schedule C. Why this?
IRS is working very hard to bridge the tax gap so that the reported income by individuals is closer to their actual income (which apparently isn’t the case in reality). The 1099K form last year was an attempt to achieve that goal, so that the IRS gets to know first hand how much you earned in online sales.
But why did I get this form and not others?
It looks like your gross sales crossed $20,000 and you have made at least 200 transactions with a payment processor. That is the criteria that the IRS uses to decide who to send it to. If you haven’t received the form, it is perfectly okay. No reason to fret at all!
Alright, what do I have to do now that I got it?
Not much really. Open up your accounting software and reconcile the data. Chances are you would panic when you see the strangely bloated sales number on the 1099K form but make note that these are gross figures and they do not take into account the refunds or returns you made.
Run the Payment Received Report in Zoho Books
There is a nifty report called ‘Payments Received’ in Zoho Books. If you have kept track of all your client payments or better still configured the online payment gateway in your accounting software then this report will list out all the payments received by you.Check out our guide on how to run the Payment Received report.
Remember not to fret if the data doesn’t match as it’s perfectly normal considering its the ‘gross sales’. Your talent hence lies in your extraordinary abilities to keep track of every expense you incurred. It’s all about being awesome at record keeping.