Form 1099-K Checklist—Tax Year 2011
Purpose
Form 1099-K reports gross merchant card and third-party network payment transactions for the 2011 calendar year. This form was created new for 2011 under IRC Section 6050W, enacted as part of the Housing and Economic Recovery Act of 2008. Payment Settlement Entities must file this form when a payee’s transactions meet both threshold requirements: gross payments exceeding $20,000 AND more than 200 transactions during the calendar year.
Understanding Filer Categories
Payment Settlement Entities must identify their role by checking the appropriate box on the form. A Payment Settlement Entity is either a merchant acquiring entity that has a contractual obligation to make payments in settlement of payment card transactions, or a Third-Party Settlement Organization that operates a third-party payment network.
An Electronic Payment Facilitator, or Third Party Payer, is an entity contracted by a PSE to make payments on behalf of the PSE. When an EPF or TPP submits the instruction to transfer funds, they must file Form 1099-K instead of the PSE. The EPF or TPP must have an immediate arrangement with the participating payee, and payment must come directly from their account.
Preparation Steps
Step 1: Determine Your Filing Obligation
Confirm whether you qualify as a Payment Settlement Entity under IRC Section 6050W. Third-party Settlement Organizations operate networks where providers of goods or services have accounts with a central organization that guarantees payment. Check the appropriate box on Copy A indicating whether you are filing as a PSE, an EPF, or a TPP.
Step 2: Verify Reporting Thresholds
The dual threshold requirements for third-party network transactions must both be met before reporting is required. The gross amount of total reportable payment transactions must exceed $20,000 for the calendar year, AND the total number of transactions must exceed 200.
Payment card transactions have no de minimis threshold and must be reported regardless of amount or transaction count. Either threshold alone is insufficient to trigger reporting for the third-party network payments.
Step 3: Obtain Payee Taxpayer Identification Numbers
Collect the correct Taxpayer Identification Number for each participating payee. For 20 transactions in the 11 calendar years, t-backup withholding was not required. The IRS issued Notice 2011-88, postponing the backup withholding requirement for one year, with backup withholding applying only to payments made after December 31, 2012. While obtaining correct TINs remains important for accurate reporting, missing or incorrect TINs did not trigger immediate backup withholding penalties for 2011 transactions.
Step 4: Classify Transaction Types with Merchant Category Codes
Enter the four-digit merchant category code in Box 2 if you use merchant category codes to classify payees. The payment card industry uses the MCC to classify businesses by the goods or services they provide. If you use an industry classification system other than MCCs, assign the MCC that most closely corresponds to the payee’s business description.
Third-party Settlement Organizations do not use MCCs and should leave Box 2 blank. If a merchant has receipts under multiple MCCs, you may file separate forms for each code or file one form using the MCC representing the largest portion of total receipts.
Step 5: Calculate Gross Payment Amounts
Aggregate all reportable merchant card and third-party network payment transactions for each participating payee. Report the gross amount in Box 1 without subtracting refunds, chargebacks, fees, credits, cash equivalents, discount amounts, or any other adjustments.
The dollar amount of each transaction is determined on the date the transaction occurred. Convert foreign currency payments to U.S. dollars using the spot rate on the transaction date or a reasonable spot rate convention, such as month-end or monthly average rates, applied consistently.
Step 6: Prepare Monthly Transaction Breakdowns
Complete Boxes 5a through 5l with the gross amount of reportable payment transactions for each month from January through December 2011. Each monthly box must reflect gross transactions for that specific month. The sum of amounts entered in Boxes 5a through 5l must equal the total amount reported in Box 1. These monthly breakdowns help payees reconcile their records and provide the IRS with transaction timing information.
Step 7: Complete Required Filer Information
Enter your name, complete street address including city, state, and ZIP code, telephone number, and federal identification number in the designated boxes on the form. The telephone number must connect payees to a person knowledgeable about the payments reported. If filing as an EPF or TPP, also enter the PSE’s name and telephone number in the designated area above the account number box.
Step 8: Assign Account Numbers When Applicable
Include an account number if you maintain multiple accounts for a recipient and are filing more than one Form 1099-K for that payee. The IRS encourages filers to include account numbers on all Forms 1099-K to facilitate accurate identification and record-keeping. Use a unique identifier that distinguishes each account for proper tracking and reconciliation.
Step 9: Prepare Form 1096 Transmittal for Paper Filing
If filing paper forms, prepare Form 1096 as a transmittal document to accompany Copy A submissions to the IRS. Form 1096 summarizes the information returns being filed and is required for all paper submissions, regardless of the number of forms being filed. Electronic filers do not use Form 1096, as the electronic filing system automatically captures the necessary transmittal information.
Step 10: Furnish Copy B to Participating Payees
Provide Copy B of Form 1099-K to each participating payee by January 31, 2012. This deadline is firm with no extensions available for 2011 reporting. The payee statement must show all information reported to the IRS. You may furnish statements electronically if you follow the requirements in Regulations section 1.6050W-2(a), including obtaining payee consent and providing required notifications.
Step 11: File Copy A with the IRS
Submit Copy A to the IRS by February 28, 2012, for filing on paper. Electronic filers have until April 2, 2012, which is the next business day after March 31, 2012, since March 31 falls on Saturday. Use official IRS forms for paper submissions, not forms printed from the IRS website, because paper forms are scanned during processing and require specific formatting. Electronic filing requires software that generates files according to specifications in Publication 1220.
Step 12: Apply Penalty Relief Provisions
The IRS provided transitional penalty relief for 2011 reporting through Notice 2011-89. This relief applies to incorrect information reported on Form 1099-K and payee statements for tax year 2011, provided the filer made a good faith effort to file and furnish Form 1099-K accurately. This transition period relief recognized that 2011 was the first year of Form 1099-K implementation, allowing filers time to establish proper reporting procedures.
Step 13: Address Multiple PSE Situations
When two or more entities qualify as PSEs for the same reportable transaction, the entity that submits the instruction to transfer funds must file the return. However, PSEs may designate another person to file on their behalf through a written agreement. If the designated filer fails to file promptly, the party making the payment remains liable for penalties under 6721 and 6722. Clear written agreements prevent duplicate reporting and clarify responsibilities.
Step 14: Handle Aggregated Payee Scenarios
If you receive payments from a PSE on behalf of other participating payees and distribute those payments, you serve dual roles. You are the participating payee with respect to the PSE who sent the payment, and you become a PSE with respect to the participating payees receiving distributions from you. You must file Form 1099-K for each participating payee to whom you distribute payments, following the same reporting thresholds and requirements.
Step 15: Understand Non-Reportable Transactions
Certain transactions are excluded from Form 1099-K reporting. Do not report ATM withdrawals via payment card, cash advances, or loans against cardholder accounts, checks issued in connection with payment cards that are accepted by merchants, or transactions where a merchant receives a payment card issued by a related entity. "Related" means persons connected within the meaning of sections 267(b), 267(c), 267(e)(3), and 707(b)(1).
Special Provisions for Foreign Payees
Payment Settlement Entities may qualify for exceptions when making payments to foreign payees. For payments under contractual obligations entered into after December 31, 2010, PSEs that are U.S. payers or U.S. middlemen are not required to file Form 1099-K for participating payees with foreign addresses if they have proper documentation to treat the payment as made to a foreign person under Regulations section 1.1441-1(e)(1)(ii).
For payments under contractual obligations entered into before January 1, 2011, PSEs that are U.S. payers or U.S. intermediaries are not required to file for payees with foreign addresses as long as the payer does not know or have reason to know the payee is a U.S. person. PSEs that are not U.S. payers or intermediaries are not required to file for payees without U.S. addresses unless they have reason to know that the payee is a U.S. person.
Year-Specific Context for 2011
Form 1099-K was reintroduced in 2011, marking the first year of its implementation under Section 6050W of the Internal Revenue Code. The form structure included PSE and EPF or TPP classification checkboxes from its inception to clarify reporting chain responsibility. The $20,000 and 200-transaction thresholds for third-party network payments were established at the form’s creation and remained unchanged for 2011.
Box 2 for merchant category codes was included in the original form design to help distinguish payment types, with instructions noting it should be completed if MCCs were known and used by the filer. Electronic filing was available through software compliant with Publication 1220, which extended the electronic filing deadline by approximately one month compared to the paper filing deadline.
No coronavirus relief provisions, Economic Impact Payment reconciliation, or American Rescue Plan Act adjustments were applied to Form 1099-K in 2011, as these legislative changes occurred in subsequent years. The form operated under the original statutory framework established by the Housing and Economic Recovery Act of 2008 and implementing regulations finalized in 2010.
Important Resources and Support
The IRS created a dedicated webpage at IRS.gov/form1099k for information and future updates. The 2011 General Instructions for Certain Information Returns provides comprehensive guidance on topics including electronic reporting requirements, penalties, nominee and middleman reporting, filing procedures, taxpayer identification numbers, statements to recipients, and corrected or void returns.
For questions about Form 1099-K reporting, contact the IRS information reporting customer service site at 1-866-455-7438 or 304-263-8700. For TTY and TDD equipment, call 304-579-4827. Service representatives are available Monday through Friday from 8:30 a.m. to 4:30 p.m. Eastern time. Additional frequently asked questions and guidance documents are available through the IRS website.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
