Do you work as an independent contractor, freelancer or ride-share driver? If so, then you may have received a 1099-K form from clients and companies that you have worked for in the past calendar year. The 1099-K is an important part of filing your taxes and understanding what it means can help ensure that you get the most out of your return. Let’s take a look at what a 1099-K is, when to expect it, how to file it and what effect it has on your return.
What Is a 1099-K Form?
The IRS defines a 1099-K form as “a form used to report certain payment transactions to improve voluntary tax compliance.” In layman’s terms, this means that businesses are required to provide employees with a 1099-K if they’ve paid them more than $20,000 in any given tax year. This includes payments made by credit cards, debit cards or third party network payments such as PayPal or Venmo. The amount reported on the form will include all income from these sources during the period covered by the form (January 1 through December 31).
When Can I Expect My 1099-K?
If you have received $20,000 or more in payments from clients or companies throughout the year then you should receive your 1099-K no later than January 31st of the following year. It is important to note that even if you don’t receive one right away, it doesn't mean that you don't need to include this information in your taxes; if applicable, make sure to still include any income earned during the previous tax year on your return.
How Do I File My 1099-K?
You will need to fill out Schedule C of Form 1040 if you are self employed in order for the IRS to properly process your taxes for any money earned via credit card payments or other third party networks. When filling out Schedule C be sure to include any additional expenses related to conducting business like advertising costs or office supplies. Additionally, make sure to also fill out Form 8300 which reports cash received from customers over $10,000 within one calendar year. Once finished with both forms submit them along with your federal income tax return and wait for notification of acceptance from the IRS.
What Effect Does My 1099-K Have On My Return?
Your 1099-K will be used by the IRS when calculating how much tax needs paid based on how much money was earned throughout the calendar year so accurate reporting is essential when filling out these forms. Your total income reported on these forms should match up with deposits made into your bank account over the course of 12 months as well as any additional expenses incurred while conducting business such as travel costs etcetera which can be deducted from total earnings reported on Schedule C of Form 1040 and Form 8300 mentioned previously. Any discrepancies between deposits into your bank account and income reported on these forms can lead to hefty fines from the IRS so accuracy is key!
Understanding all aspects of filing taxes can be daunting but understanding what a 1099 K is , when to expect one , how to file one and its effect on returns are essential steps towards getting maximum value out of returns . Taxpayers should take time researching before submitting their returns in order minimize errors and maximize value . With proper preparation and research , anyone can benefit greatly from understanding what a 1099 K does .