Discussion:1099-K..notice that AmEx will use them starting 2011

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Discussion Forum Index --> Tax Questions --> 1099-K..notice that AmEx will use them starting 2011


OCNumberz (talk|edits) said:

16 September 2010
I was at an accounting clients today and opened a notice from AmEx for their merchant account notifying that AmEx will:

"[...] annually report the gross amount of each merchant's payment card transactions on Form 1099-K to the Internal Revenue Service (IRS), as well as to the participating merchant, starting in 2011."

The 1099-K is available in draft form online, and has separate boxes for each month. This is the first notice I've seen regarding the new 1099 changes set in motion by Obama.

I wonder if this will encourage more 'cash' sales for those who don't want to report it all.

Anybody else seeing notices like this?

Natalie (talk|edits) said:

September 16, 2010
I really don't think vendors are going to start turning away customers who want to pay via credit card. Take a look at the draft, though. It requires reporting by month.

Laticiaw (talk|edits) said:

16 September 2010
Why the heck do they have a federal withholding box. Are they going to expect the Merchant Settlement Cards to start withholding the back taxes due from the settlement proceedings? The federal government just made it a whole lot easier for my boss to remain a cash/check only business.

LH2004 (talk|edits) said:

September 16, 2010
Quite the opposite. When small businesses purchasers have the choice between paying by credit card or tracking every dollar they spend all year so that they can figure out to whom to give a 1099 for all goods and services they buy, including from corporations, buyers are going to have no-cash policies; merchants are then going to be choosing between taking credit cards or turning away all of their small-business customers.

Jossiecpa (talk|edits) said:

16 September 2010
So, will credit card companies be allowed to raise their fees in order to pay for the additional cost to them of processing these monstrosities? Good grief.

Kevinh5 (talk|edits) said:

16 September 2010
LH, I thought it was illegal to not accept US currency "this note is legal tender for all debts, public and private". There is an urban legend (or old wive's tale, if you've got an old wife with a tail) that if you offer US cash to pay for something and it is refused, the vendor must give you that item for free (or the debtor can no longer enforce collection).

I fly Delta quite a bit (they just upgraded me from Silver to Gold Medallion status this month) and they now are 'cashless', meaning you have to pay for your drinks and snacks by credit card and not cash.


I've often wanted to challenge them based on the text on my dollars and the urban legend, but haven't figured out how to without causing an 'incident' resulting in a TSA confrontation when I land.

Kevinh5 (talk|edits) said:

16 September 2010
I see that someone has addressed this concern in this blog: http://www.aruba.com/forum/f33/delta-cashless-12-1-09-a-42180/

Kevinh5 (talk|edits) said:

16 September 2010
and this http://www.flyertalk.com/forum/archive/t-1078471.html

LH2004 (talk|edits) said:

September 16, 2010
They have to accept legal tender as payment for any debt; they don't have to enter into a transaction with you under which they'll accept any particular payment, legal tender or not.

Most sellers will continue to be happy to accept cash. It's buyers that will refuse to touch the stuff, if it means that they'll have to issue their own -MISC's (and keep extensive records in case several transactions add up to the threshold) instead of letting the banks issue -K's for them.

CathysTaxes (talk|edits) said:

16 September 2010
Out of curiosity, what if you have goofy clients who use their business credit cards extensively for personal use (yes, I book these either as draws for proprietors and partnerships and distributions for scorps). Do these still have to be issued?

Kevinh5 (talk|edits) said:

16 September 2010
yes

because the merchant still sold something with payment via credit card


the whole purpose is to make merchants report all of their income

Szptax (talk|edits) said:

16 September 2010
and what about personal cards used for business?

Kevinh5 (talk|edits) said:

16 September 2010
and what about my answer above?

PVCC-CCIFP (talk|edits) said:

2010-09-16
Laticiaw:

I just received one of these notices from AM EX at work. The notice is actually a request to verify the TIN and other information Am Ex will need to file the 1099-K. Part of the notice states something to the effect that if Am Ex does not receive the verified information, they will be forced to withold taxes at the federally mandated 28% rate, so yes the implication is that the credit card companies will be required to withhold taxes on merchants who have not provided a proper TIN. It is on my list on things to do this week to not only respond to Am Ex's notice, but to proactively provide the information to our other credit card processors as well.

--PVCC-CCIFP 11:05, 16 September 2010 (CDT)

OCNumberz (talk|edits) said:

16 September 2010
PVCC, Yes, I did go online and do that thinking I was just logging in to see what was there, and all I got was a 'thank you' for the EIN info.

Sounds to me like this notice is telling any MERCHANT that he can expect to receive a 1099-K reporting his income received to the IRS. Conversely, for the person paying with a credit card, sounds like you're off the hook to prepare a 1099 for your purchase over $600. So, paying by check could cause you the extra work of preparing a 1099 at the end of the year, I'm guessing, whether for business or personal.

As an aside on credit cards, I like to use them so I don't have to plan on how much cash to carry and to have better records for my expenditures. But, while recently investigating a change in merchant services for this same accounting client, I discovered that when a merchant takes a card that looks like a simple VISA, for example, he doesn't necessarily pay the 2.5% agreed upon. The cards with miles and rewards seem like a great deal for the receiver of the prize, but it's really the poor unsuspecting merchant who pays for that with increased credit cards fees...sometimes up to 5.5%.  : ( No product/service seems simple anymore...it's all wrapped up with some sort of a giveaway that somebody has to pay for.

(or old wive's tale, if you've got an old wife with a tail)

Kevin, maybe your Hunny Bunny ?  : )

CathysTaxes (talk|edits) said:

16 September 2010
I wonder how much the credit card companies are going to charge for each 1099-K that they issue. PLUS, accounting packages will have to be changed so that reporting be split via payment type (cash/check vs credit/debit) so that 1099-Misc can be issued excluding the credit card/debit card payments.

You know this won't be a minor free upgrade, all accounting packages will have a new release that we have to all pay for.

CathysTaxes (talk|edits) said:

16 September 2010
Oh, does this mean if the business pays $800 to a merchant, $400 is from check and $400 is from credit card, then he doesn't have it issue a 1099-Misc and the credit card company doesn't have to issue a 1099-K?

Trillium (talk|edits) said:

16 September 2010
The related reg answers a lot of the questions you guys are asking about how the 1099-K works: REG-139255-08, reflecting the enactment of Sec. 6050W in the Housing Assistance Tax Act of 2008.

Prior discussions on the new 1099-MISC reporting requirements may also be useful for info on some of the other questions above:

Actionbsns (talk|edits) said:

16 September 2010
Cathy, a few weeks ago the IRS commissioner was bandying about the suggestion that when we, the little guy, get ready to prepare massive 1099's, we separate out the payments made with cash and the payments made using a credit card, and only issue the 1099 based on the cash payments. Did that actually go anywhere? I haven't heard that it did, but last I heard is that it was something being discussed.

OCNumberz (talk|edits) said:

16 September 2010
The related reg answers a lot of the questions you guys are asking about how the 1099-K works: REG-139255-08.

Trillium, if only we could read all that and truly understand it...mindboggling!  ; )

Cathy/Action, for those using QuickBooks, it does record the method used for monies paid by directing you to the Credit Card Payment screen. At this point, the 1099 screen does allow you to separate out payment for 1099 recipients by the account you use. For instance, I get paid by a client who codes me to Professional Fees-Accounting. If I purchase some Office Supplies and they reimburse me, I can tell QB to NOT include Office Supplies in calculations for the 1099's. Unfortunately, that would exclude an office supply vendor getting more than $600. But, with low 1099 volume, I temporarily recode the office supplies to another excluded account, do the 1099's, and then recode back. I'm sure QB could easily put out an update to correct all their software to EXCLUDE THE CREDIT CARD CHARGES when computing 1099's. I use Enterprise 9 and don't intend to purchase a newer version. I'm sure Intuit is the kind of company that will help us all to comply without purchasing a totally new version. Maybe it's just wishful thinking, though...

CathysTaxes (talk|edits) said:

16 September 2010
OCN, right now, I record all purchases, credit/debit card, cash/check to the single vendor. For example, I have two clients with company trucks. If they use ten different Speedways, I only use one vendor. Since Speedway is probably a franchise, I now would have to separate them.

Another thing I do that I will have to probably stop - I set up the owners as a Credit Card Payable for their expenses. I record all they out of pockets to this CC payable and any checks they make to themselves, I offset to this account with the overage going to the draw/distribution accounts. In my 1099 mapping, it just maps an account to the 1099 Category. I don't see any place to exclude credit card payments or cash. I do accept credit cards (but noone has taken me up on it), so if my client pays me $800 in credit cards and $900 in a check, when I book his entries, I don't see how for 1099-Misc and 1099-K they can currently be segregated. Either QB has to change the software, or I use a different 1099 application (saving a report to Excel and filtering credit card payments), or I use different vendors. I truly believe that QB and other software applications will seize this as an opportunity to force clients to use a new release. Right now, you're only forced if you do Payroll because they stop supporting earlier versions.

OCNumberz (talk|edits) said:

17 September 2010
Cathy, I can see how you could record credit/debit cards that way, but if you issue a check, can many different entities cash it if they use the name "Speedway?" I have a contractor who uses a supply house with different locations, and each issues its own invoices and collects its own receivables, so I make separate checks. I think you'll definitely have to separate your payments when you are billed by separate entities.

The 1099 preparation is a function of the Vendor database, and I don't think you have to use QB payroll (many use an outside service) to prepare them. All that will be needed, from what I see, is for Intuit to reprogram the 1099 function to separate out the credit card payments, since the merchant service will do that for you. I'd be surprised if Intuit, in this economy, would force all its users to buy a new product just to meet the new 1099 requirements, but we won't know until the time comes.

This brings up another point....I notice that many small corporations don't use corporate credit cards to pay their bill (especially when an expensive product is not shipped until prepaid)...a key employee will use his credit card for payment and be reimbursed by the company. So, then the key employee/shareholder will have to, in turn, get a 1099 back from his own company for the repayment. This could get quite cumbersome and confusing. : (

And, where on the tax return will the key employee/shareholder put this repayment?...or will the 1099 back to his company that the merchant service prepares on his behalf be a wash???

CathysTaxes (talk|edits) said:

18 September 2010
OCN, in my case, client has not paid by check, only credit card and debit card. The only checks I create are payroll related, so this method works right now. And you are right about clients using business and personal credit cards. My clients have both types and they make business and personal purchases on either of them (which I book separately and they wonder why I have to put in a lot of entries, LOL).

So, are these 1099-K's only going to be issued on business accounts? How much per 1099 will they charge?

As far as Intuit, when I was using Lacerte, I loved the Trial Balance import utility from Quick Books to Lacerte. Then Intuit started charging for this import, so I would not be surprised if they decided to make these changes in a new release only. As a retired computer programmer/analyst, I know how these guys think. Since I'm a geek, I'd export the information to a file and create my own application to create the 1099's. The only thing I'd have to do is go to the IRS website and download the publication on efiling requirements so I can make the file efile compatible because I'm betting the IRS will be requiring all 1099's to be sent to them electronically or on disk.

Actionbsns (talk|edits) said:

18 September 2010
Cathy and OC - If I'm understanding your discussion correctly, in QB, after you have produced your 1099 report for a particular vendor, you should be able to go into the report under the modify feature and isolate only cash payments or payments made with checks, whatever the term is that has been used, and get a revised report that would exclude credit card payments. It would just be easier and faster if we don't have to do that. My last question was left unanswered, do we know for a fact that this is what is going to happen? I did some checking on it yesterday and couldn't find an update to Shulman's comments, only that he had discussed this as an option.

OCNumberz (talk|edits) said:

18 September 2010
Cathy, I personally have an AmEx card, and I have NOT been notified of this 1099-K reporting for 2011. But, I thought EVERYBODY had to issue 1099's over $600, now also to corporations, but I'm not sure if my understanding is correct. I'm also not sure what Intuit will do. I don't mind using QB's reports and modifying them to eliminate data I don't want to compute 1099 data. If Intuit requires you do buy a new program for 1099's, I'll just use the 1099 software that comes with the forms I purchase. I work with small corps, so not a big problem for me.

Action, yes, it would be easier and faster if we didn't have to do that. But, even after you do that, I'm not sure if QB will let you ONLY print what you want. You can map each box on the 1099 to one or more accounts. So, if the same account is paid both by credit card and check, I don't think QB's 1099's will be correct unless they modify their software. To have the 1099 feature that we've all come to expect work properly, I can hardly see them NOT programming it to meet reporting requirements for No Charge. Afterall, if you purchase the payroll feature, it updates the tables, etc., so that it is always correct without upgrading. This 1099 requirement seems like much the same to me. But, again, we just won't know until the time comes.

Actionbsns (talk|edits) said:

19 September 2010
So you are actually printing 1099's in QB? I've never done that. It doesn't do a good job, seems that the format is all wacky or something. It doesn't fit the paper I buy or something. I print all 1099's in the CFS program. Data has to be transferred, but it has always worked for me. The form 1099-K doesn't look like the form businesses will use. It looks like the form the merchant carriers are supposed to use. I think businesses will still be using 1099 MISC.

CathysTaxes (talk|edits) said:

19 September 2010
Action, I use QB for printing 1099s. Haven't had any problems with the format. And if I'm understanding the 1099K correctly, when we issued 1099-Misc, we have to subtract out the credit card payments BUT the credit card would have to be a business credit card. OCN, my understanding is that we have to issued 1099s to everyone, including corporations. Also, my version of Payroll requires an annual subscription, so I expect QB to modify their application for the many new changes. From my former life as a computer geek, each year, I had to install a year end update for payroll, I rarely had to do anything for 1099s.

Geez, I need some chocolate.

Belle (talk|edits) said:

September 19, 2010
I print 1099's using QB also - I buy the laser forms at Office Depot. I've occasionally had to play with the formatting /alignment, but it's never been a major issue.

I've also tried (two or three years ago) the export to CFS, and then efiling the F 1099's via CFS. But to me, it was quite cumbersome and enough errors that I felt I spent a lot of time verifying the information.

But with these new rules....I see F 1099 processing becoming much more involved.

Natalie (talk|edits) said:

September 20, 2010
Who lobbied to put this in the bill anyway? It's going to be a huge mess for many small businesses.

CathysTaxes (talk|edits) said:

20 September 2010
Hmm, this 1099K has me thinking. Is PayPal going to be required to do this? For those not familiar with PayPal, it basically allows you to have a virtual account that you can fund with your checking/savings account and/or credit card, which you can use online to purchase items and sell items.

The merchant version of the accounts (which I have because I have an internet based business and use the online auction sites), allows you to accept credit cards and they charge a per transaction fee plus a percentage of the amount. PayPal also has an easy portal to USPS and UPS for printing shipping labels. It is owned by a certain well known online auction site, and it's sellers with PayPal accounts normally pay the seller fees with PayPal. For online sites that don't accept PayPal, PayPal provides a Mastercard account number for each of their accounts.

So, would PayPal have to issue 1099-Ks to the auction site, USPS, UPS and what about the merchant fees? Would these be reported on the 1099-K's also? Of course it's pretty easy to estimate what the gross sales were with an easy calculation.

OCNumberz (talk|edits) said:

20 September 2010
Cathy, I bet PayPal will send out some sort of notification when the time comes....AmEx is probably just getting it out of the way early.

Natalie, wasn't this part of that HUGE bill that nobody had time to read before it got signed?

Belle, I buy forms at Staples and probably get the same thing as you do. It comes with software, but it just seemed easier to use QB...I'm already familiar with its limitations, so why learn new ones?  ; )

Action, I think you don't like QB because of how it uses the data you've input into the Vendor record. It allows FIVE LINES, and many times you don't need 5. But, I use a PERIOD as a placeholder. You might have a vendor like this:

ACME Nuts & Bolts

Attn: A/R

12345 State Street

Suite 987

Anaheim, CA 99999


But, if the client has no suite number, it looks like this:

ACME Nuts & Bolts

Attn: A/R

12345 State Street

.

Anaheim, CA 99999


You need to use the Address Details button to put them in correctly, otherwise QB will slide all info up and group with the incorrect information.

Also, for a sole prop vendor, I do not input the FIRST NAME & LAST NAME boxes above the NAME AND ADDRESS box. Otherwise, the 1099 looks like this:

John Doe, E.A

John Doe, E.A.

Attn: John Doe

1055 Sunny Skies Rd.

Suite 1

Los Angeles, CA 99000


I print a few on plain paper to see where QB is going to mess with me and head him off at the pass before he does.  ; ) 1099 forms aren't cheap!  : (

CathysTaxes (talk|edits) said:

21 September 2010
OCN, I can't wait to visit the forums of the online auction sites website when PayPal makes this announcement. I TRIED to give them advance notice, but I got blasted because I mentioned that is was resulting from Obama Care. There are a lot of sellers who do not report their sales properly and they are going to freak out to hear PayPal will be issuing 1099s.

Now here's a situation where I do think a lot of unclaimed income will be discovered. Just by PayPal reporting the merchant fees, it would be so easy to estimate the gross sales. Since the IRS shares 1099 reporting with the states, the states can check to see which sellers have registered for sales tax and start contacting the sellers who aren't registered. The IRS can easily identify sellers who aren't reporting their sales.

Natalie (talk|edits) said:

September 21, 2010
Natalie, wasn't this part of that HUGE bill that nobody had time to read before it got signed? Yes, as I understand it, it was added in. It doesn't have anything to do with healthcare. I just wonder who would suggest something like this. It just sounds like there is the potential for so many errors to be made.

OCNumberz (talk|edits) said:

21 September 2010
Natalie, I agree it has nothing to do with heathcare and will be a nightmare to comply.

But, I see the purpose.... to track those not claiming income. I did an S-Corp return this year where the CPA last year ONLY reported income as per 1099's received. After her books and cash were reconciled, she really had $25k more income than was reported. So, it looks like 1099 reporting could bring in more revenue. Personally, I claim all mine cause I like to sleep at night, but from what I hear others saying, that's not the norm. Returns are prepared from 'documents', not based on what has actually occurred.

SKath (talk|edits) said:

21 September 2010
The 1099-K requirements IRC 6050W was enacted by the Housing Assistance tax Act of 2008, signed into law by President Bush. It applies to business that accept credit card payments. It has nothing to do with using a credit card to pay your expenses. It also has nothing to do with the Health Care reform bill.

OCNumberz (talk|edits) said:

22 September 2010
Cathy, I don't use PayPal, but I looked it up. It looks like a way to have your credit card info and bank info stored for making purchases over the internet. So, I don't know why PayPal itself would be involved...the merchant account linked to it seems to be the one to report the payments (but only for businesses, as SKath states). As for the PayPal that is attached to your bank account, that to me seems to be the same as a purchase by check...the bank won't be involved in reporting that. But, I guess we'll see when the time gets closer.

SKath, thanks for that clarification. I think the confusion comes in because the 1099 requirement seems to have been grouped on a timeline for the next few years' changes with all the other heathcare related changes. I've seen several, and they all seem to include the news about the 1099 reporting.

Natalie (talk|edits) said:

September 22, 2010
Yes, thank you for that clarification, Skath. I was told by someone who read the 1099 section of the healthcare act that this was in there, but I guess he misunderstood what I was referring to. This new law also applies to gift cards.

Take a look at [this]. I wonder if the credit card companies had something to do with this. See page 20.

Smokeytax (talk|edits) said:

22 September 2010
Thanks for the link, Natalie. That sheds some light.

The section of the new HealthCare law relating to issuing forms 1099 was put in as one of the many revenue raisers so that the bill "pays for itself" - $17 billion is the figure I saw.

CathysTaxes (talk|edits) said:

22 September 2010
OCN, the credit card feature of PayPal is a newer feature. It originally was like an online account for payments. Now there is a debit card feature.

For commercial accounts, there's a money market option and your customers can pay you with a credit card if they don't have a PayPal account. PayPal will authorize and settle these. If the customer has a PayPal account, the funds come from that account and then any bank account or credit account tied to the PayPal account is accessed for the remaining funds.

So, it's kind of a hybrid. It would be interesting to see what the 1099-K means to PayPal. I just sent them an email concerning it

OCNumberz (talk|edits) said:

23 September 2010
Natalie, thanks for that great link. I'm going to go relax and read it now.  : )

Smokeytax, it's kind of funny that you call this new rule a 'revenue raiser'... it's just using a reporting system that will get many to claim income that people like me claim whether they get a form or not. Imagine how many would claim their income as an employee without a friendly W-2 "reminder" when the tax year has ended.  ; )

Cathy, I remember letting my young teen son set up a PayPal account about 8 years ago to purchase an Ebay toy from England. I think with PayPal you only had a month to get your refund for non-performance. The kid in England kept telling my son he'd get it wrapped and in the mail, but never did..so the month was gone. But, luckily, we had our PayPal tied to my credit card, and they stepped in and credited my account, forcing PayPal to take back out of the seller's bank account. That was the last time we used PayPal or Ebay! But, we'll see soon how they fit into this new 1099-K ruling.

Smokeytax (talk|edits) said:

23 September 2010
OCNumberz - good point about tax reporting. So many folks really think that income isn't taxable unless it's reported on a form 1099 or W-2 - until they go to a reputable tax preparer that is.

I'm only using the terminology referred to in the published summaries of the health care bill - another description I've seen is "revenue enhancers". (Haven't read the actual bill itself yet.)

OCNumberz (talk|edits) said:

23 September 2010
Smokeytax, it definitely IS a revenue enhancer when all in a group are required to pay their share. ; ) I heard recently that 60% do their own taxes...so a paper reminder is what is needed. Imagine when a W-2 first became a requirement..there was probably lots of complaining then! ; )

Natalie, I read that PDF in full last night, and it was very good! I have a client who is concerned, and I will pass on the link. It gave a good history of merchant account providers' requirements, and how this new law will affect them. Thank you!  : )

OCNumberz (talk|edits) said:

26 September 2010
One last thought on this...and SAD to think I woke up with this on my mind!  ; )

After reading Natalie's informative link of 9/22 called 'this,' I realized how this AmEx notice received by my client was to start the 1099-K ball rolling. In the notice, login info for this S Corp (using AmEx to collect sales receipts) was given so that their EIN could be input. This will then be used by a government database to make sure the name matches with the SSN/EIN...no DBA's allowed. A mismatch will cause the IRS to issue a "B Notice" to AmEx causing a 28% withholding until rectified. It sounds as if AmEx can get a W-9 in the interim until cleared up to avoid the withholding.

So, a heads up to your clients that these notices are on their way and need to be addressed (a quick and ACCURATE input online of the SSN/EIN) could cause a lot less grief later.

EatonCPA (talk|edits) said:

27 September 2010
CathysTaxes brought up a truly scary point with franchisees. How is one supposed to know and how many clients are actually going to ask? So if I understand correctly that debit card purchases work like credit cards for 1099-K purposes, I guess the best advice we can give our clients is to pay as much as possible via one of those formats.

Ugh - I understand what they are trying to do, but the potential for uglies here is nearly infinite.

Solomon (talk|edits) said:

27 September 2010
"This new law also applies to gift cards." Not when used in related network of stores.

ยง1.6050W-1(e)

"Example 6. Gift card. (i) Customer A purchases a gift card from Merchant X that may be used only at X and its related network of stores. A purchases the gift card using cash. A gives the gift card to B. B uses the gift card to purchase goods at one of X's stores. The purchase of the gift card by A using cash is not a payment card transaction described in paragraph (b)(1) of this section and, thus, is not required to be reported in a return of information required under paragraph (a)(1) of this section. Under paragraph (b)(3) of this section, the gift card is not a payment card because the gift card is only accepted as payment by persons who are related to the issuer of the gift card and to each other. Therefore, the use of the gift card by B is not required to be reported in a return of information required under paragraph (a)(1) of this section."

OCNumberz (talk|edits) said:

27 September 2010
Eaton, I'm thinking the same thing, myself....use either a Credit or Debit card for purchases, which means more fees for somebody.  :( I guess we can only safely use Cash when we know we'll spend less than $600 at one place.

Soloman, Thanks for the clarification on gift cards. So, if I purchase $625 of iTunes gift cards, I'd better use my Credit Card to pay for them!  ; ) Actually, that brings something else to mind, and this may be the thought behind that ruling on network of stores. Let's say I purchase a $1000 gift card for Santa, and he MUST shop only at Target. When I use my Credit Card to purchase the gift card, Target's sales income will already be recorded by Target's Merchant Services company..they'll issue the 1099-K to Target. When Santa shops it's irrelevant..the $1000 sale has already been recorded. Make sense?

CathysTaxes (talk|edits) said:

27 September 2010
Having the credit card companies do the bulk of the reporting will save the little guy a lot of time and costs in issuing 1099s. I already try to use the credit card just to get the cash back or other rewards. I use the debit cards so I don't have to buy checks. My business may not even have to issue 1099's.

IMO, this ruling will encourage businesses to get away from using cash and thus cut back on those who don't report their income. Personally, I don't like to do business with merchants that don't accept plastic (though I will if there aren't many other options).

Right now, businesses are forcing consumers to use credit. eBay doesn't allow the sellers to state in their listings that they accept checks or money orders. Sellers are required to accept an electronic form of payment. Bidders have to contact sellers before bidding to see if they accept checks or money orders.

Natalie (talk|edits) said:

September 27, 2010
Thanks for that additional information, Solomon. When I read the rules, I was thinking of all the cards that are sold at our local grocery store.

So if I understand correctly that debit card purchases work like credit cards for 1099-K purposes, I guess the best advice we can give our clients is to pay as much as possible via one of those formats. I'm not so sure about this -- at least the debit card part. Unless changed recently, debit cards usually carry a higher risk of loss than credit cards in cases of fraud.

CathysTaxes (talk|edits) said:

28 September 2010
Natalie, after I did the 2008 return for my client, I suggested he get a debit card for his scorp so he would stop writing checks to cash and then using the cash to buy supplies and pocket the rest. The result: yeah, he got the debit card, now 90% of the transactions are personal purchases! And he still writes checks to cash.

EatonCPA (talk|edits) said:

28 September 2010
Natalie - that's a valid point about identity theft implications of debit cards. Typically I use my debit card as a credit card for many transactions to protect against that since it's the PIN that causes that increased risk.

What's also going to interest me is seeing if this new requirement encourages more of our corporate clients to get their acts together earlier. Getting smacked with late filing penalties for the information returns might teach them a much-needed lesson. ;)

OCNumberz (talk|edits) said:

28 September 2010
By the way Solomon, sorry for the earlier misspellings!

I use an ATM card only that REQUIRES a PIN. When you all say Debit Card, are you referring to the one that LOOKS like a credit card, but that does NOT REQUIRE a PIN? Because of no PIN, I hesitate to get one.

Solomon (talk|edits) said:

28 September 2010
"By the way Solomon, sorry for the earlier misspellings! "

Sticks and stones break my bones but misspellings and oinks image:oink.jpg never hurt me. image:smile.jpg

Natalie (talk|edits) said:

September 28, 2010
OCN, I guess I'll have to look up the details on debit cards again. First of all, credit cards usually have a maximum risk of loss of $50 due to fraudulent activity. Many even have $0 risk because the credit card company will simply reverse all of the fraudulent charges. The risk of loss for debit cards, however, is much higher. You might want to take a look at this.

OCNumberz (talk|edits) said:

28 September 2010
Solomon, Pigs are smart, so I only yell 'oink' when overeating is involved! ; )


Natalie, you are quite the good link finder!  :) This just validates my earlier thoughts... don't use DEBIT CARDS!

"2. Our Recommendation: Do Not Use Debit Cards"

Whenever the bank gives me one, I tell them to take them it back and give me an ATM-only card that requires a pin. How easy were the days when you used a check (with number control) to pay a bill and then put a ten-cent stamp on it and dropped it in the mail...

I stay away from auto debits, too, like the gyms prefer to get. I found out the hard way that only THEY could stop the payment going out of MY account.  : ( I won't do that one again....credit card only, where I have the merchant service to back me.

CathysTaxes (talk|edits) said:

2 November 2010
Bumping.

On September 22nd, I brought up if PayPal would be issuing 1099-Ks. Today, I finally got this response from them:

I understand that you would like to know if PayPal will be issuing a 1099-K form. PayPal will be generating 1099-K forms for our merchants, however, not until 2012 for the 2011 calendar year. Bold text


I tried to be nice and warn the online auction sellers about this, got my hand slapped and 'corrected' with inaccurate information, so I won't be sharing this with them. I do know some of you accept PayPal, so I am happy to share this with you.

EasternPA (talk|edits) said:

4 December 2010
CathyTaxes,

You should go back into the fray with the ingrates. Just paint the following scenario:

At the end of January, 2011, Paypal will make it's first 1099-K report to the IRS.

If the merchant's information does not jive with their records, they will issue a Notice B to Paypal.

Paypal is then obligated to withhold 28% of the payments to the merchant. At the end of February, Paypal sends the 28% withholding to the IRS.

The merchant can only recover the 28% withheld on his 2011 tax return in calendar year 2012. Box 4 of the 1099-K will show the amount withheld for the whole year.

It should get their attention.

CathysTaxes (talk|edits) said:

4 December 2010
Eastern, I'd love to do as you suggest, but they won't be interested into it actually goes into play, at the end of January 2012. Then I will tell them "I told you so". Another thing they forget is that their eBay fees are paid with PayPal, so it could be easier to identify sellers who aren't reporting their income and those who have decided to report it as misc income and not schedule C (which is very common for some of the power sellers over there, at least those who post on their discussion boards). I'm not even sure how PayPal will handle the fees they take out. It would be easy to estimate net amount based on PayPal fees.

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