1099-K Question

[SimplyPrintDesign]

Just received my e-mail from Etsy requesting tax related information for my direct checkout sales. It states that you have to process over $20,000* and 200 payments through direct checkout within a calendar year with a 1099-K form before January 31st of the following year.

My question is, if I reach 200 payments but do not reach $20,000 in sales are they reporting my sales to the IRS? The wording is confusing me a little.

[FenderGemsNCrystals]

LINK: http://www.irs.gov/businesses/article/0,,id=251489,00.html

New 1099-K Reporting Requirements for Payment Settlement Entities


Beginning in January, 2012, payment settlement entities (PSEs) are required by the Housing Assistance Tax Act of 2008 to report on Form 1099-K the following transactions:

All payments made in settlement of payment card transactions (e.g., credit card);
Payments in settlement of third party network transactions IF:
-Gross payments to a participating payee exceed $20,000; AND
-There are more than 200 transactions with the participating payee.

[SimplyPrintDesign]

So, you have to reach $20,000 in sales AND have more than 200 transactions, not one or the other?

[FenderGemsNCrystals]

According to the IRS but you never know how a business will interpret it. This is the first year so lots of businesses might cover their bases by sending out forms for both.

[OriginalsbyLauren]

My understanding is that you have to reach both, but we have to file taxes anyway, so I wouldn't worry about it

[SimplyPrintDesign]

Got it, thanks so much for the feedback! :)

[Former_Member]

I am always surprised at how much concern there is over this question. Are some people thinking that if they do not get the 1099, they do not have to claim anything on their taxes?

[Former_Member]

my understanding is that you must meet both criteria.

so if you make 100 sales in one tax year and you are selling diamond rings at $1,000 each you would not be required to pay taxes on the $100,000 because it's under 200 sales.

[FenderGemsNCrystals]

Dianne: No, you need to report your income regardless if you get a 1099 or not. Most self employed people do not get 1099's. This is a new reporting scheme but it does not change the facts that you have to pay income taxes regardless of receiving a 1099 or not.

[OriginalsbyLauren]

I used to do taxes for hrblock.

If you are already filing a tax return (another job, joint return, etc) you have to report income over $20.

If you don't file taxes, then I think you have to make the standard deduction to have to file.

HOWEVER, unless you live in a state with no sales tax, once you are filing sales tax you would be taking a huge chance not filing income tax. They will have your information in their system

[ButterflyFeetDigital]

Good info.

[BabsiesPlace]

As a USA Citizen you are required to report whatever sales you make on your yearly income tax, whether you have one sale or a zillion. If you are receiving money from buyers than you must pay tax. Its just like going to work, at the end of the year you submit your debits & credits and either you get a refund or you have to pay.
Hope this helps some of you!

[Former_Member]

Cheryl- I am having a big trust issue with Etsy over this exact thing right now! I didn't see this thread or would have posted here. Here's a ink to my thread: http://www.etsy.com/teams/11969/direct-checkout/discuss/10784346/page/1/
I read the wording the same as you and the others who posted here, yet Etsy is asking for my complete SSN & I'm nowhere near the threshold! I don't have a problem following the rules AS STATED WHEN I SIGNED UP FOR DC (as I won't be reaching that $20k threshold!!), but I'm feeling deceived on this issue & forced to give my SSN, or Etsy WILL turn off my DC! Someone suggested in my thread to get an EIN from the IRS, and I've tried, but the site is having technical difficulties. I hope I can get that, because I'm not comfortable giving my SSN when my sales don't meet the criteria! I report & pay my taxes as I should; I don't need big brother peeking into my business any more than they already do!!!