What Form 1099-K (2013) Is For
IRS Form 1099-K (2013) is a tax form used to report payments received through payment cards and third-party network transactions during the calendar year. It applies to businesses, independent contractors, and individuals who receive payments from credit card companies or payment apps such as PayPal or Stripe. The form helps the IRS determine taxable income by tracking total payment transactions processed by a payment settlement entity. It includes payments made for goods and services, ensuring that income from online marketplaces, debit and credit cards, and stored value cards is adequately reported.
This form is issued by third-party settlement organizations and payment processors that send copies to both the taxpayer and the IRS. The total amount reported reflects gross payments before deducting refunds, fees, or deductible expenses. For a business owner or taxpayer who receives payments electronically, Form 1099-K provides tax information that must be reconciled when filing a tax return to avoid errors or omissions.
When You’d Use Form 1099-K
Form 1099-K is used when a taxpayer or business receives payments through a payment platform or credit card processor that meets the IRS reporting threshold. For 2013, third-party settlement organizations were required to report if both the total amount exceeded $20,000 and there were more than 200 transactions. Businesses that accept payment cards, however, were subject to reporting regardless of the number of transactions or total funds received.
Taxpayers use the information from Form 1099-K to report payments and calculate taxable income on their tax return. If the form includes personal payments or items sold at a loss, these amounts are generally not taxable; however, they should be documented along with other records. Filing late or failing to report payments can result in penalties, so the taxpayer should review all tax information carefully before submitting the return.
Key Rules or Details for 2013
The reporting rules for IRS Form 1099-K (2013) were designed to help the IRS track income paid through third-party payment platforms and credit card processors. Third-party network transactions required both the $20,000 and 200-transaction thresholds to be met before reporting could occur. Payment card transactions had no minimum or threshold amounts, meaning all gross payments were subject to reporting.
The form reported the total amount paid to the taxpayer, including money for goods, services, and other taxable earnings, before adjusting for refunds or fees. Because the form shows gross receipts rather than profit, taxpayers must account for deductible expenses on their tax return. This helps ensure that only actual taxable income is subject to taxes under federal law.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step (High Level)
Taxpayers do not file Form 1099-K themselves; however, they must use it to report payments on their tax return accurately. The information supports 1099 K reporting from a payment settlement entity for payment cards and third-party network transactions during the calendar year.
Step 1: Verify Receipt and Accuracy
Confirm that the form was received by the end of January and that the filer and payee details match the account on the payment platform. Check that the total amount in Box 1 equals the gross payment transactions reported by the payment apps and credit card companies.
Step 2: Match Against Business Records
Compare the form’s totals with bank statements, processor dashboards, and other records to ensure the figures include all payments for goods and services. Verify that the gross income reported reflects amounts before refunds, fees, or deductible expenses.
Step 3: Calculate Actual Net Income
Determine taxable income by subtracting costs such as payment processing fees, shipping, inventory, and chargebacks from gross receipts. Exclude personal payments, a personal item sold at a loss, or other non-business funds, so only business earnings remain subject to taxes.
Step 4: Report Income on the Tax Return
Report payments on Schedule C or the applicable business return, then claim deductible expenses to arrive at net profit. If backup withholding or state taxes were withheld, record the credit so the taxpayer does not overpay.
Step 5: Maintain Supporting Documentation
Keep detailed documentation for at least three years, including processor statements, refund logs, monthly box totals, and reconciliation workpapers. These records help resolve IRS matching questions and support figures if a notice is issued.
Common Mistakes and How to Avoid Them
Taxpayers often make costly but straightforward reporting errors when filing Form 1099-K. The most frequent issues include:
- Not reconciling multiple payment platforms: Combine and review data from all processors (e.g., PayPal, Square, Venmo) to ensure accurate reporting of income.
- Using an incorrect taxpayer identification number: Verify all TINs before filing to prevent backup withholding and IRS notices.
- Forgetting to report withheld taxes: Any federal income tax withheld, shown in Box 4, should be claimed as a credit on the tax return.
- Ignoring refunds or chargebacks: Always account for refunded transactions or chargebacks when calculating gross proceeds to report accurate earnings.
Proper reconciliation of payment data, accurate recordkeeping, and review of IRS filing instructions help ensure compliance and prevent reporting discrepancies or penalties.
What Happens After You File
After a taxpayer files their tax return, the IRS uses 1099-K reporting to verify that the income reported matches the information sent by the payment settlement entity. If there are differences between the reported income and the total amount on the tax form, the IRS may contact the taxpayer for additional information.
When income and reported payments are consistent, no further action is required. If discrepancies arise, the IRS may issue a CP2000 notice requesting clarification or documentation. Taxpayers should maintain accurate records, including refunds, fees, and deductible expenses, to support their figures and ensure compliance with federal tax laws.
FAQs
What is IRS Form 1099-K (2013) used for?
IRS Form 1099-K (2013) is a tax form used to report payments received through payment cards or third-party network transactions. It helps the IRS track income from credit card companies, payment apps, and online marketplaces during the calendar year.
Who issues Form 1099-K, and when is it sent?
A payment settlement entity or third-party settlement organization issues Form 1099-K. They must send copies to both the IRS and the taxpayer by January 31 to report payments made through payment cards or payment platforms.
Does Form 1099-K include personal payments or sales of individual items?
Form 1099-K includes all payment transactions, but personal payments or a personal item sold at a loss are generally not taxable. Taxpayers should maintain records to prove that these expenses were not business-related, thereby avoiding incorrect reporting of taxable income.
How does the reporting threshold work for third-party payment platforms?
In 2013, third-party settlement organizations reported only if both the total payments exceeded $20,000 and the number of transactions exceeded 200. Payment card transactions had no threshold and were reported regardless of the total amount received.
What should a business owner do after receiving Form 1099-K?
A business owner should verify that the total amount reported matches their own records. They must report payments accurately on their tax return, deduct legitimate business expenses, and keep documentation for backup withholding or refunds if needed.
