What Form 1099-K (2014) Is For
IRS Form 1099-K (2014) reports payments processed through payment cards and third-party network transactions during the tax year. It helps individuals and businesses accurately report payments received through credit cards, debit cards, and online networks. The form, issued by a payment settlement entity, shows the total payments received before deducting any fees or refunds.
Form 1099-K provides essential tax information for reporting gross income on an income tax return. The IRS uses this form to ensure that all income is properly reported and to identify any discrepancies between what a payer reports and what a taxpayer reports. It serves as an essential record for businesses and individuals who accept electronic payments throughout the calendar year.
When You’d Use Form 1099-K
A taxpayer receives Form 1099-K if they accept payments through payment cards or party network transactions that meet reporting requirements. For 2014, third-party network transactions must exceed $20,000 in total costs and include over 200 transactions to be reportable. All payment card transactions are reportable, regardless of the total amount.
Individuals and businesses use this form to verify that their reported gross income matches what was actually earned. If a form is incorrect or missing, the taxpayer must contact the payer for correction. Even without receiving Form 1099-K, all income must still be reported to comply with federal tax requirements.
Key Rules or Details for 2014
For the 2014 tax year, payment settlement entities were required to furnish Copy B of Form 1099-K to recipients by January 31, 2015, and file Copy A with the IRS by February 28 (for paper submissions) or March 31 (for electronic submissions). The form reports the total amount of payments, merchant category codes, and any federal income tax withheld due to backup withholding.
Backup withholding applies when a taxpayer identification number, such as a Social Security number, is incorrect or missing. In such cases, 28% of total payments are withheld and reported to the IRS. The withheld amount can be claimed as a credit when filing the income tax return. Taxpayers must ensure the reported figure equals their records to avoid issues or discrepancies.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step (High Level)
Step 1: Verify Payment Activity
The payer records all card and third-party network transactions during the calendar year. Each payment adds to the gross total amount that will be reported on the form.
Step 2: Check Thresholds
Payment cards have no threshold for reporting; for third-party networks, both the $20,000 and 200-transaction limits must be met.
Step 3: Review and Fill Out Form Details
The form contains several boxes summarizing tax information:
- Box 1a: Total amount of reportable transactions
- Box 4: Federal income tax withheld, if any
- Boxes 5a–5l: Monthly breakdown of payments
- Boxes 6–8: State tax details if required
Step 4: File and Distribute Forms
The payer sends Copy B to the payee by the last day of January and files Copy A with the IRS by the stated deadline.
Step 5: Include on Tax Return
The payee uses the reported amount to prepare their income tax return. They must report gross income from all sources, subtract allowable business expenses, and ensure that the reported figure matches what the IRS receives.
Common Mistakes and How to Avoid Them
Taxpayers often make reporting errors when completing Form 1099-K, resulting in overreported income, notices, or penalties. The most common issues include:
- Believing Form 1099-K shows taxable income: The form reports gross receipts, not net profit. Deduct business expenses such as fees, refunds, and supplies to determine taxable income.
- Double reporting income: Some taxpayers mistakenly include the same transactions on both Form 1099-K and Form 1099-MISC. Reconcile all income sources to ensure each payment is reported only once.
- Using an incorrect taxpayer identification number: An invalid TIN or Social Security number can result in backup withholding. Confirm that your payment processor has the correct information and provide a Form W-9 if necessary.
- Ignoring errors on received forms: If the form contains mistakes, request a corrected version promptly. If one cannot be issued before filing, use the available information and retain documentation explaining the discrepancy.
- Maintain proper records: Keep monthly merchant statements, transaction summaries, and correspondence with processors to reconcile gross receipts and verify reported amounts in the event of an IRS audit.
Thorough recordkeeping, income reconciliation, and prompt error correction ensure accurate reporting and help taxpayers stay compliant with IRS requirements.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once the payer files Form 1099-K with the IRS, the agency matches the reported total payments with the taxpayer’s income tax return. If differences are found, the IRS may send notices, such as CP2000 or Letter 525, requesting clarification or payment of additional taxes.
Taxpayers should respond promptly to any IRS communication and provide supporting documentation to resolve the issue. The statute of limitations for assessing additional taxes is generally three years from the date the tax return is filed. However, if income is significantly underreported or the return is not filed, the IRS may take action beyond that period.
FAQs
Who issues IRS Form 1099-K (2014)?
A payment settlement entity, such as a bank, credit card processor, or online platform, issues IRS Form 1099-K (2014) to report payments received through payment cards and third-party network transactions during the tax year for income tax purposes.
What should I do if I didn’t receive Form 1099-K?
If you meet the reporting requirements for third-party network transactions or payment cards but didn’t receive Form 1099-K, contact the payer immediately. All gross income must still be reported to the IRS on your tax return.
How does backup withholding affect my income tax return?
Backup withholding happens when the taxpayer’s identification number, such as a Social Security number, is incorrect or missing. The payer withholds 28% of total payments, which can later be claimed as a tax credit when filing.
Does Form 1099-K represent my taxable income?
Form 1099-K reports total payments, not taxable income. Businesses and individuals must calculate gross income, deducting fees and expenses separately. The IRS uses this information to ensure accurate income reporting and prevent underreporting of income.
Can individuals receive Form 1099-K for personal payments made through a payment processor?
Yes, individuals may receive Form 1099-K even for non-business transactions if a third-party network processes the payments. If the total amount is incorrect or personal, contact the payment settlement entity for correction before filing your return.
What if there’s a difference between Form 1099-K and my records?
If the total amount on Form 1099-K doesn’t equal your records, review your payment card statements, bank deposits, and business books. Report accurate income on your tax return and maintain documentation in case the IRS requests clarification.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
