Form 1099-K Checklist: 2015 Tax Year
Purpose
Form 1099-K reports payment card and third-party network transactions. For 2015, filers must report transactions exceeding $20,000 AND 200 transactions in the calendar year. The IRS requires payment settlement entities to file this form to track reportable payment transactions and ensure proper income reporting.
Filing Steps
Step 1: Verify 2015 Reporting Threshold Met
Confirm the payee’s aggregate gross payment card or third-party network transactions exceed $20,000, and the transaction count exceeds 200 for calendar year 2015. Both conditions must be satisfied for reporting obligations to apply. Document the exact transaction count and dollar amount for audit support. Third-party settlement organizations must meet these thresholds, while payment card transactions have no minimum threshold requirements.
Step 2: Classify Filer Type for 2015
Check the appropriate box on the form: Payment Settlement Entity (PSE), Electronic Payment Facilitator (EPF), or Other Third Party. The 2015 instructions require explicit identification of filer capacity because liability and reporting obligations differ by entity type under IRC Section 6050W. A PSE includes merchant acquiring entities and third-party settlement organizations that submit payment instructions.
Step 3: Complete Merchant Category Code Field (If Applicable)
Enter a valid four-digit merchant category code in Box 2 if you use MCCs to classify payees. Box 2 is optional for Third Party Settlement Organizations or filers who do not use any industry classification system for payees. If you use an industry classification system other than MCCs, assign the MCC that most closely corresponds to the payee’s business description. For payees with receipts under multiple MCCs, either file separate forms for each MCC or file one form using the MCC corresponding to the largest portion of total gross receipts.
Step 4: Report Gross Payment Amounts in Box 1a
Enter the gross amount of total reportable payment card and third-party network transactions for the calendar year. The gross amount refers to the total dollar amount, excluding adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, and any other similar amounts. Determine the dollar amount of each transaction on the date it occurred. Report payment card and third-party network transactions on separate forms if both apply to the same payee.
Step 5: Complete Box 1b for Card Not Present Transactions (Mandatory)
Enter the gross amount of transactions where the card was not present at the time of the transaction or the card number was keyed into the terminal. This typically includes online sales, phone sales, or catalogue sales. Box 1b completion is mandatory for 2015, whereas it was optional on the 2014 form. Report the gross amount using the same calculation method as Box 1a, without adjustments for fees or refunds.
Step 6: Report Monthly Breakdown in Boxes 5a Through 5l
Enter gross transaction amounts for each month of 2015 from January through December in the appropriate boxes. Verify that the sum of monthly totals reconciles to the Box 1a annual aggregate amount. Monthly granularity supports payee reconciliation and IRS verification of consistent reporting patterns throughout the year.
Step 7: Complete Box 3 Number of Payment Transactions
Enter the count of payment transactions processed during 2015, excluding refund transactions. Count only purchase transactions processed through the payment card or third-party payer network. Document the methodology used to exclude refund transactions for internal records.
Step 8: Obtain and Verify Complete Payee TIN
Collect the payee’s complete nine-digit Social Security Number, Individual Taxpayer Identification Number, or Employer Identification Number. Report the complete nine-digit number to the IRS on Copy A. Copy B furnished to the payee may display only the last four digits for privacy protection. Still, you must report the full TIN to the IRS to prevent processing errors and penalties.
Step 9: Furnish Copy B to Payee by February 1, 2016
Deliver Copy B of Form 1099-K to the payee on or before February 1, 2016. This is the deadline for furnishing statements to recipients for the 2015 calendar year. The form may be furnished electronically if the recipient consents, as per Regulation section 1.6050W-2(a). Retain proof of delivery for your records.
Step 10: File Copy A with the IRS by February 29, 2016 (Paper) or March 31, 2016 (Electronic)
Submit Copy A to the appropriate IRS Service Center based on your principal business location. For paper filing, the deadline is February 29, 2016. For electronic filing via the FIRE System according to Publication 1220 specifications, the deadline is March 31, 2016. The IRS does not provide a fill-in PDF option, and forms printed from the IRS website cannot be scanned and processed. Use only official IRS forms or approved substitute forms that comply with Publication 1179 specifications.
Step 11: Prepare Form 1096 Transmittal for Paper Submissions
Accompany paper Copy A submission with Form 1096, Annual Summary, and Transmittal of U.S. Information Returns. Include the filer name, EIN, tax year 2015, and a count of Forms 1099-K being submitted. File a separate Form 1096 for each type of information return that you are filing. Do not send Form 1096 with electronic submissions through the FIRE System.
Step 12: Account for Corrected Returns (If Applicable)
If a 2015 Form 1099-K must be corrected, mark the CORRECTED checkbox at the top of the form and file a corrected Copy A with the IRS. Furnish a corrected statement to the payee as well. The 2015 instructions do not establish a separate deadline for corrected returns. Follow the same February 29, 2016 (paper) or March 31, 2016 (electronic) deadline as the original filing, or file the correction as soon as the error is discovered.
Step 13: Apply Backup Withholding When Required
Report backup withholding in Box 4 if the payee has not furnished a taxpayer identification number in the manner required. For third-party settlement organizations, a payment is subject to backup withholding only if the payee received payment in more than 200 transactions within the calendar year, regardless of the monetary amount. Payment card transactions have no transaction threshold for backup withholding purposes. Consult the 2015 General Instructions for Certain Information Returns for applicable backup withholding rates and procedures.
Step 14: Verify Electronic Filing Requirements
Electronic filing is required if you file 250 or more information returns of any type during the calendar year. To file electronically, obtain approval by submitting Form 4419, Application for Filing Information Returns Electronically. Once approved, you do not need to reapply annually. Use the FIRE System at fire.irs.gov, which operates 24 hours a day, 7 days a week. Your software must generate files in accordance with Publication 1220 specifications.
Step 15: Maintain Records and Documentation
Keep copies of information returns filed with the IRS or maintain the ability to reconstruct the data for at least 3 years from the due date of the returns. Keep copies for 4 years if backup withholding was imposed. Retain supporting documentation showing how you calculated reportable amounts, applied the de minimis threshold, and classified transactions. Maintain records of TIN verification efforts and Form W-9 collection.
2015-Specific IRS Updates and Changes
Box 1b Card Not Present Transactions Now Mandatory
The 2015 instructions require completion of Box 1b for all filers reporting payment card transactions. This box was optional on the 2014 form. Box 1b captures the gross amount of transactions where the card was not physically present, enabling the IRS to identify patterns of online, phone, and mail-order sales.
Box 2 Merchant Category Code Remains Conditional
Box 2 for merchant category codes is not mandatory for all filers. Third-party settlement organizations and filers who do not use industry classification systems should not complete this box. Payment settlement entities that use MCCs or similar classification systems should enter the four-digit code in Box 2 to help classify the payee’s business type.
No Reporting Threshold Adjustment for 2015
The $20,000 and 200-transaction thresholds remain unchanged for 2015. Congress established these thresholds in IRC Section 6050W, and they are not indexed for inflation. Third-party settlement organizations must meet both thresholds. Payment card transactions are reportable, regardless of the amount or transaction count, provided the PSE submits payment instructions.
Copy B Partial TIN Display Rule Clarified
The 2015 instructions clarify that Copy B furnished to the payee may display only the last four digits of the taxpayer identification number for privacy protection. However, filers must report the complete nine-digit TIN to the IRS on Copy A. This distinction prevents identity theft concerns while ensuring the IRS receives complete information for processing and matching.
Electronic Filing Specifications Reference Publication 1220
The 2015 instructions confirm that electronic filers must comply with Publication 1220 specifications. The FIRE System requires files in the proper format with no alternative e-filing method permitted. The IRS does not provide a fill-in form option for Form 1099-K. Filers require software that generates files in accordance with the technical specifications outlined in Publication 1220.
Filing Deadline Structure Maintained
For 2015 returns, paper filers must submit by February 29, 2016; electronic filers have an extended deadline of March 31, 2016. Statements to recipients are generally due by February 1, 2016. These deadlines apply unless the due date falls on a Saturday, Sunday, or legal holiday, in which case the deadline is extended to the next business day.
Important Considerations
Payment settlement entities must understand their obligations under Section 6050W and determine whether they qualify as a PSE, EPF, or other third-party entity. Multiple PSEs may be involved in the same transaction. Still, only the PSE that submits the instruction to transfer funds must file the return unless the parties agree in writing to designate another entity. Electronic payment facilitators who contract with PSEs must file Form 1099-K instead of the PSE unless the PSE files by designation.
Aggregated payees who receive payments from a PSE on behalf of multiple participating payees must file Form 1099-K as both the participating payee with respect to the upstream PSE and as the PSE with respect to downstream participating payees. This nominee or middleman reporting ensures complete transaction tracking through the payment chain.
Certain transactions are non-reportable under section 6050W, including ATM withdrawals, cash advances, checks issued in connection with payment cards accepted by related merchants, and transactions where the payment card is accepted by a merchant related to the card issuer. Filers should review the exceptions carefully to avoid over-reporting.
For payments made outside the United States or to foreign payees, special rules apply. PSEs may not be required to file Form 1099-K if specific conditions are met regarding the payee’s foreign status, offshore account maintenance, and proper documentation collection. Consult the detailed exceptions in the 2015 instructions and applicable IRS Notices for foreign payment scenarios.
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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.
