Note: IRS delays the rollout of the $600 threshold for 1099-K reporting.
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The threshold for Form 1099-K remains at $20,000 with a 200 transaction limit for the year 2023. This delay designates 2023 as a transition period, maintaining the existing requirements for reporting.
Learn all you need to know about 1099-MISC forms and 1099-Ks. From the information you need to report, to the purpose of the forms, we have it all covered in this read.
The festive spirit is in the air, and you can almost feel the Christmas carols playing in the background while you sit by the fireplace with your family and friends, sipping on some hot cocoa. But wait, before you can fully enjoy this peace and relaxation, there’s one small thing that you need to take care of – your taxes!
While most of us dread the tax season, it is essential to be mindful of the different types of forms that are required to be filed. Two such common forms are 1099-MISC and 1099-K. This article will discuss the critical differences between the two forms so that you’re in a better position to handle your taxes this season.
So, let’s get started!
Understanding 1099-MISC and 1099-K Form
The Internal Revenue Service (IRS) defines a 1099-MISC form as a “catch-all” document. This is because the Form is used to report miscellaneous income that doesn’t fit into any other category. It is generally used to report certain payments, such as rent, royalties, and commissions.
On the other hand, the 1099-K Form is used to report income generated through payment cards and third-party network transactions. The third-party entity, in this case, would be the card processor or the payment network. The 1099-K Form covers transactions processed through credit cards, debit cards, and other electronic payment methods.
The main difference between the two forms, then, is the type of income that they report. The 1099-MISC Form covers miscellaneous income, while the 1099-K covers income generated through payment card transactions.
Who Should File Form 1099-MISC?
Form 1099-MISC should be filed by any person or business who pays $600 or more in rent, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish purchased from anyone engaged in the trade, or business of catching fish, or gross proceeds to an attorney during legal services.
To help you understand better, let’s take an example. Say, you have leased out an office space and the total rent for the year amounts to $700. In this case, you will have to file Form 1099-MISC for the entire amount since it is more than $600.
Who Should File Form 1099-K?
Form 1099-K is filed by Payment Settlement Entities (PSEs). A PSE is a third party that settles transactions between a merchant and their customer.
Examples of PSEs include banks, third-party payment apps like Venmo, PayPal, etc, credit card companies, and other similar payment processors. The total gross payments should be more than $600 during the tax year.
Let’s understand this better with an example.
Say, you are a PSE, like Paypal, and in a year, you process total payments of more than $600 to a merchant, then you have to file a 1099-K for that merchant.
Related Article: 1099-NEC DIY Guide: The Easiest Step-By-Step Guide To eFile 1099-NEC
Deadlines For Filing 1099-MISC And 1099-K
No one wants to file their taxes late. And while the 1099-MISC and 1099-K forms may seem similar, they serve two very different purposes. So it’s important to be aware of the deadlines for each and make sure you’re using the right Form.
Related Article: The Simplest DIY Tax Guide For 1099-MISC Filers For The 2022-23 Tax Year
Form 1099-MISC: When Is It Due?
| Filing Type | Due Date |
| Recipient Copy (No Data in Box 8 or 10) | Jan 31, 2023 |
| Recipient Copy (With Data in Box 8 or 10) | Feb 15, 2023 |
| IRS eFile | March 31, 2023 |
| IRS Paper Filing | Feb 28, 2023 |
Form 1099-K: When Is It Due?
| Filing Type | Due Date |
| Recipient Copy | Jan 31, 2023 |
| IRS eFile | March 31, 2023 |
| IRS Paper Filing | Feb 28, 2023 |
1099-MISC VS 1099-K: The Key Differences
Sometimes, the differences between IRS forms can seem small and insignificant. But, when it comes to the IRS, even the smallest mistake in reporting can result in penalties. So, it’s important to ensure you’re using the right form for your specific use case.
With that in mind, let’s look at some key differences between the 1099-MISC and 1099-K forms.
| Differences | 1099-MISC | 1099-K |
| Purpose Of Form | The 1099-MISC reports miscellaneous income. This includes things like rent, royalties, and prizes. | The 1099-K is used to report payment transactions. So, if you’re a business that processes online transactions, you’ll need to issue a 1099-K for your merchants. |
| Reporting Threshold | The 1099-MISC must be filed if you’ve paid someone $600 or more in a year. | The 1099-K must be filed if you’ve processed transactions totaling $600 or more in a year. |
| Payee | The 1099-MISC can be issued to individuals, partnerships, and corporations. | The 1099-K can be issued to businesses or individuals that use a third-party payment processor. |
| Payer | The 1099-MISC is usually issued by individuals, firms, partnerships, or corporations. | Payment settlement entities issue the 1099-K – typically, this will be the bank, credit card processor, or other financial institution through which the transactions were processed. |
| Filing Deadline | The 1099-MISC must be filed by January 31st. | 1099-Ks must be filed by February 28th (or March 31st if filed electronically). |
Related Article: W-2 Vs 1099-NEC: What Should You File?
Tax1099: The Perfect Match For Your 1099-MISC And 1099-K Filings
No one wants to spend hours dealing with paperwork and tracking missing information. And when it comes to filing your taxes, the last thing you want is to make a mistake that could cost you money or even land you in hot water with the IRS.
Thankfully, Tax1099 can help take the pain out of tax season. We’re an IRS-approved e-file provider, which means we can help you e-file your 1099-MISC and 1099-K forms quickly and easily.
Moreover, our platform is designed to handle even the most complex filing requirements. So whether you’re a small business owner or a large corporation, we can help you get your 1099s filed on time without any headaches.
Still not convinced? Here’s a closer look at some of our top features that can make filing your 1099s a breeze:
1) Quick And Easy Integration: If you are in charge of 1099 filing for your company, the last thing you want is to waste time on a lengthy and complicated integration process. Tax1099 has you covered with our quick and easy integration. We support all major accounting software platforms, so no matter what system you’re using, we can help you get started in no time.
2) Bulk Filing Capabilities: Filing 1099s can be time-consuming, especially if you have many forms to file. Tax1099 makes it easy with our bulk filing capabilities. You can upload an unlimited number of forms at once, so you can get your 1099s filed quickly and without hassle.
3) Accurate TIN Verification: The last thing any business wants is to file 1099 with an incorrect TIN. With penalties adding up to $50 per form, it can even cost you tons of money and a bad reputation. Tax1099 offers an automated TIN matching service that will verify the TINs in seconds on all your forms, ensuring that they’re accurate before you file.
4) Fast and Reliable Customer Support: Filing 1099s can be complex, so Tax1099 offers fast and reliable customer support. Our team is available to answer any questions you may have, and we’ll ensure that you can file your forms correctly.
With so much on the line, choosing a 1099 filing service you can trust and rely on, is important. Tax1099 has provided businesses with accurate and reliable 1099 filing services for years. If you’re looking for a 1099 filing service that will make your life easier, look no further than Tax1099.