Form 1099-K Checklist for 2019 Tax Year
Purpose
Form 1099-K reports payment card and third-party network transactions to the IRS and payees.
For the 2019 tax year, the reporting threshold requires a gross transaction volume exceeding $20,000 AND more than 200 transactions annually. Payment Settlement Entities must report transactions by merchant category code and include monthly breakdowns in Boxes 5a through 5l, with specific guidance on treating refunds and adjustments within the same calendar year.
Filing Requirements Checklist
Step 1: Verify Reporting Threshold Met
Confirm the payee received payment card or third-party network transactions exceeding $20,000 in gross amount AND surpassing 200 transactions during calendar year 2019. Both conditions must be satisfied to require Form 1099-K issuance. These thresholds apply specifically to third-party settlement organizations. Payment card transactions have no minimum threshold requirements.
Step 2: Identify Filer Type Correctly
Check the appropriate box on Form 1099-K to indicate whether the filer is a Payment Settlement Entity, Electronic Payment Facilitator, or another third-party network operator. An Electronic Payment Facilitator designation applies only when the entity contracts with a PSE to make payments directly to merchants. Incorrect filer classification may trigger IRS correspondence and potential penalties.
Step 3: Collect and Verify Payee Identification Data
Obtain the payee’s complete legal name, street address (including apartment number if applicable), city, state, ZIP code, and Taxpayer Identification Number. Verify the TIN matches IRS records. Do not truncate or mask the complete nine-digit EIN on Copy A filed with the IRS. Copy B furnished to the payee may display only the last four digits for privacy protection.
Step 4: Compile Merchant Category Code
Enter the four-digit merchant category code assigned to the payee’s business in Box 2. The MCC must reflect the primary business classification. If the payee operates multiple merchant types, report the MCC corresponding to the largest aggregate transaction volume during 2019.
Third-party settlement organizations that do not use industry classification systems should leave this box blank.
Step 5: Record Gross Transaction Amounts by Month
Complete Boxes 5a through 5l with the gross amount of payment card and third-party network transactions for each calendar month of 2019. Include all transactions settled in that month. Report gross proceeds only without subtracting refunds, chargebacks, credits, fees, or any other adjustments. This reporting method aligns with Internal Revenue Code Section 6050W requirements.
Step 6: Calculate and Enter Total in Box 1
Sum all monthly amounts from Boxes 5a through 5l and enter the aggregate gross amount in Box 1. For 2019, this total must equal or exceed $20,000 to trigger reporting for third-party network transactions. Verify mathematical accuracy, as discrepancies between the monthly detail and Box 1 total may cause IRS matching errors and delay processing.
Step 7: Complete Box 3 Appropriately
If available, report the number of purchase transactions excluding refunds in Box 3. This box remains optional for Payment Settlement Entities. When completed, the count must reflect the total number of transactions processed, not including adjustments or reversals. PSEs are not penalized for leaving this box blank.
Step 8: Provide PSE Contact Information
Enter the Payment Settlement Entity’s name and telephone number in the designated field. If a third-party payer or Electronic Payment Facilitator is facilitating payment on behalf of the PSE, the PSE remains the named filer and remains liable for accurate reporting. The telephone number must allow payees to reach a knowledgeable person about reported payments.
Step 9: Prepare Proper Copy Distribution
Prepare three copies: Copy A for the IRS, Copy B for the payee, and Copy C for the filer’s records. Forms must remain uncut and unfolded during processing to ensure proper machine scanning. Do not separate individual forms on the printed page. For electronic filing, follow the FIRE System specifications outlined in IRS Publication 1220.
Step 10: Meet Payee Furnishing Deadline
Furnish Copy B of Form 1099-K to the payee by January 31, 2020, for 2019 tax year transactions. If furnishing the form electronically, include a written statement as required by the 2019 instructions. Failure to provide timely returns may result in penalties under Internal Revenue Code Section 6722, which imposes a penalty ranging from $50 to $280 per form, depending on the extent of the late filing.
Step 11: File Copy A with the IRS Timely
File Copy A with the IRS by February 28, 2020, for paper filing or March 31, 2020, if filing electronically. Printed copies from the IRS website cannot be filed for Copy A submissions. Only official forms ordered from the IRS or electronic transmission via approved software are acceptable. Electronic filing requires 250 or more forms of the same type.
Step 12: Attach Form 1096 Summary
Complete and file Form 1096 with all Copy A forms submitted on paper. Form 1096 must show the total number of 1099-K forms, the aggregate gross amount reported, and the filer’s EIN and contact information. File a separate Form 1096 for each type of information return that you are filing. Do not use Form 1096 for electronic submissions through the FIRE System.
Key 2019 Year-Specific Updates
Refund Reporting Clarification
The 2019 instructions confirmed that refunds and chargebacks should not reduce the gross amount reported in Boxes 1 and 5a through 5l. Payment Settlement Entities report the total dollar amount of reportable payment transactions without regard to any adjustments for credits, cash equivalents, discount amounts, fees, or refunded amounts. The dollar amount of each transaction is determined on the date the transaction occurs.
No Threshold Inflation Adjustment
The $20,000 and 200-transaction thresholds remained unchanged from prior years in 2019. No inflation indexing was applied to these de minimis thresholds. Third-party settlement organizations must use these exact figures when determining reporting obligations for calendar year 2019 transactions.
EPF Definition Refinement
The 2019 instructions made it clear that a PSE must explicitly contract an Electronic Payment Facilitator to process payments to merchants. Self-directed payment processors or marketplace platforms operating independently may not claim EPF status without a formal PSE agreement. The facilitator is not required to have any arrangement or agreement with the participating payee.
Account Number Reporting
The account number field must contain the unique identifier assigned by the PSE to the payee’s account. Account numbers serve to link multiple 1099-K forms to a single merchant. The IRS encourages filers to designate an account number for all Forms 1099-K that they file. Account numbers are required when filing various forms for a payee with different accounts.
Merchant Category Code Requirement
Box 2 for MCC must be completed if the PSE’s system captures or assigns a code. Payment Settlement Entities using merchant category codes or other industry classification systems must assign each payee an MCC that most closely corresponds to the description of the payee’s business. If a payee has receipts under multiple MCCs, file either separate forms for each MCC or a single form reporting the MCC corresponding to the largest portion of total gross receipts.
Truncating Recipient’s TIN
All filers may truncate a payee’s TIN on payee statements furnished to recipients. Truncation means displaying only the last four digits of the SSN, ITIN, ATIN, or EIN. Truncation is not allowed on any documents filed with the IRS. The filer’s TIN may never be truncated on any form.
Foreign Address Exceptions
Payment Settlement Entities are not required to file Form 1099-K for payments made to participating payees with foreign addresses if certain conditions are met. The PSE must not know, nor have reason to know, that the participating payee is a U.S. person. Specific exceptions apply to payments made outside the United States to offshore accounts when proper documentation, such as Form W-8BEN, is collected.
Multiple PSEs Reporting
If two or more persons qualify as PSEs for the same reportable transaction, the PSE that submits the instruction to transfer funds must file the return. However, the PSE obligated to file may designate another person to file the return if the parties agree in writing. The designated person’s failure to file promptly makes the entity with responsibility liable for applicable penalties.
Conversion of Foreign Currency
When payments are made or received in a foreign currency, convert the amount to U.S. dollars on the date of the transaction at the spot rate or, if a reasonable spot rate convention is used, at a month-end spot rate or a monthly average spot rate. The convention must be used consistently for all non-dollar amounts reported, both within and across years.
Backup Withholding Requirements
Payees who have not furnished their TIN in the manner required are subject to backup withholding on payments aggregately reported in Box 1a. For third-party settlement organizations, a fee is potentially subject to backup withholding only if the payee received payment in more than 200 transactions within a calendar year. The monetary threshold is not considered for backup withholding purposes. Payment card transactions have no limiting thresholds for backup withholding.
Extension Requests
Automatic 30-day extensions are available by filing Form 8809 by the original due date. Submit Form 8809 on paper or through the FIRE System electronically. Under certain hardship conditions, an additional 30-day extension may be requested. Extension requests must include appropriate signatures or explanations as specified in Form 8809 instructions.
Electronic Filing Mandate
Filers submitting 250 or more Form 1099-K must file electronically. The IRS FIRE System allows for electronic submission in accordance with the specifications outlined in Publication 1220. TIN Matching services are available through IRS e-services to validate TIN and name combinations before filing, thereby reducing the likelihood of backup withholding notices and penalty notices.
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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.
