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The Basics of 1099K Instructions






     Many people with small businesses or who run their own one-person online business or shop want detailed 1099K instructions because they're worried that new tax regulations relating to the 1099-K will leave them unable to prepare adequately for tax day. But the reality is that the 1099-K will only make dealing with taxes more difficult and time-intensive for small merchants. It hasn't led to any kind of fundamental change. Whether a person receives an Amazon, checking account, credit card, or Paypal 1099-K, the change is really just about separating certain payment flows.

Of course, merchants who have actually been hiding some of their income from online payment and credit card sources, which were harder for the IRS to track before requiring the 1099-K from payment processors, will see their tax rate go up this year and probably experience increased scrutiny in the future. But for the majority, who have kept decent records and for whom any mistakes were simple oversights, it will just be a matter of figuring out what other information is necessary that was previously unimportant and paying attention to try to avoid repeats of those past mistakes.

Any company that processes online payments through credit cards or any other system is required to send a 1099-K to each of its customers that receives over 200 transactions with a total payment value in excess of $20,000 in a year. It also has to send that same 1099-K to the IRS to report these online payments. The nature of this requirement means that many people who get this form won't have actually generated income equal to the total payment transfer amount listed, but 1099K instructions probably won't make this clear most of the time. This discrepancy leads to the most important piece of accounting that small business owner must do to take care of this new tax form. Specifically, he or she needs to know what portion of every payment accepting through a means that would lead to a 1099-K actually went to fees or other things instead of revue, such as state sales tax or other fees.

Of course, keeping track of all that data can be quite difficult. For those who failed to do so with enough detail in 2011, the IRS will probably offer some reprieve in the form of not worrying too much about further small mismatches. And the information on the 1099-K doesn't have a impact on expected taxes for the 2011 year anyway. That starts in 2013 for 2012 revenue. This brings up the most important of 1099-K instructions. Find an effective small business accounting tool like the free bookkeeping software offered by Outright.com. This kind of accounting makes it easily to quickly log and record all these types of transactions and the relent details for each of them. Not only does this promote better financial management, it makes filing tax returns easier and facilitates claiming the maximum about of allowable tax deductions. This makes effective bookkeeping software one of the best things a small business owner can invest in to prepare for the 1099-K and any other potential difficulties.




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1099K Instructions Should Be Clear. The Big Change from the 1099-K is More Time-intensive Bookkeeping to Track Online Payments.


Posted on 2012-02-01, By: *

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