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Form 1099-K Instructions 2022: How To Read, Prepare & File Form 1099-K, Payment Card & Third-Party Payment Network Transactions

Note: IRS delays the rollout of the $600 threshold for 1099-K reporting.
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.

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Here’s a simple tax guide to help you read Form 1099-K and understand the 1099-K reporting instructions 2022.

Form 1099-K has been the connecting factor between the independent contractors that receive payments from third-party payment settlement entities, and the IRS, making it a critical tool for establishing tax compliance in the gig economy. 

When independent contractors, self-employed individuals, and small businesses receive payments from payers, the third-party payment settlement entities are obligated to report such payments made to the participating payees on Form 1099-K and send a copy of the form to the payee, prior to the filing deadlines as prescribed by the IRS. 

This brings us to the question: Why is Form 1099-K so important? What is its purpose? What is its mechanism? 

Let’s take a look at all such questions and more in this discussion.

Purpose Of IRS Form 1099-K

When a third-party payment network entity or a payment card entity (debit/credit card companies) processes payments to a payee in the course of business, such payments must be reported by the payers on Form 1099-K. Payees receive Form 1099-K with the reportable transactions. The IRS requires payees to review and recognize the receipt of such payments and declare the same in their income tax statements to ensure compliance. 

If you’re a payee and you observe a conflict in the 1099-K reports sent by your PSE (payment settlement entity), the IRS encourages you to take up the issue with the filer (the payer) and resolve the dispute (if any). 

Fundamentally, Form 1099-K enables the IRS to understand the volume of transactions and the amounts transferred through a third-party electronic payment system, such as a credit card or a third-party payment network entity.

Box-Wise Instructions For 1099 K Reporting 2022: Read Form 1099-K Easily

  • Download Form 1099-K here (Current revision)

Box 1a – Gross Amount Of Payment Card/Third-party Network Transactions

Use this box to check the gross amount of payment card/third-party network payments made to you (the payee) through the PSE during a calendar year. 

Box 1b – Card Not Present Transactions

Use this box to check all transactions in which a payment card was not used or if the card number was keyed into the terminal. Think of phone sales, online sales, or catalog sales transactions where a card is not used. 

If the box for ‘Third-party Network’ is checked, it means that those transactions cannot be reported in this box. 

Box 2 – Merchant Category Code

Use this box to check the merchant category code, which is typically used for payment card/third-party network transactions. Some merchants may not provide their category codes and that’s okay. It will not affect your reports in extreme.

Box 3 – Number Of Payment Transactions

Use this box to validate the number of transactions processed by the payer through the payment card/third-party network to the payee in a calendar year. This is not the amount involved in the transaction but the count of all the transactions processed in a year. 

Note: This figure does not include the refund transactions.

Box 4 – Federal Income Tax Withheld

Use this box to review the total federal tax withheld by the payer. Payees must pay attention to this box. If the payee has not furnished the valid TIN/legal name information to the payer, federal income tax will be withheld by the payer. 

Boxes 5a–5l – Gross Amount Of Payment Card/Third-party Network Transactions Made

Use this box to review the gross amount of payment card/third-party network payments you’ve received for each month of the calendar year.

Example: If you’re working for a gig employer like Etsy or Uber, you may receive a number of payments from the payer spread across the month. The total gross payments you receive in a month will be reported as payments for that month by the payer.

Boxes 6–8 – State Income Tax Withheld

Use this box to check if the state and local income tax has been withheld from your payments.

Advantages Of eFiling 1099-K Form With Tax1099: For Payers

Every year, thousands of payment settlement entities, payment card companies, and third-party payment network companies use Tax1099 to prepare and eFile their 1099-K returns to the IRS seamlessly. 

Tax1099, a digital tax compliance enabler helps businesses like yours to prepare and file 1099-K forms electronically. 

Our advanced bulk eFiling and API integrations enable businesses to import their bulk data and prepare the forms effectively. 

Tax1099’s TIN Matching system helps businesses verify millions of payee TINs in real-time within seconds, preventing IRS TIN discrepancies and incorrect TIN penalties. This also eliminates the risk of reporting inaccuracies.

Verify your payee TINs, prepare your 1099-K forms quickly, and eFile thousands of forms at once with Tax1099 – your most trusted choice for accurate and effective electronic 1099-K filing.

How to eFile Form 1099-K 2022 With Tax1099 Easily?

With Tax1099, you can easily prepare and file your 1099-K returns efficiently. 

But to get started, you have to create a free Tax1099 account. 

Step 1: Import Your Payee Data 

Import your payee transaction data within seconds with the available integrations and applications. This will enable you to gather all the necessary data to prepare your returns accurately. At this point, you can opt for API services to eliminate the process of manually entering the data. 

Step 2: Verify TIN + Validate Form Data 

Once you furnish the data on the 1099-K form, check for relevance and accuracy. Check your own transaction data and compare it with the information reported on Form 1099-K. Edit the forms to correct any incorrect details. 

Step 3: eFile Form 1099-K

Once you’re through with the review process and confident that your reports are accurate to the best of your knowledge, hit the ‘eFile’ submission button to transmit your returns directly to the IRS within seconds. 

And that’s it!

Get a Free Demo & Explore How 1099-K Bulk eFiling Works