Form 1099 k merchant card and third party network payments

A payment settlement entity (PSE) must file Form 1099-K, Payment Card, and Third Party Network Transactions to report payments made in settlement of reportable payment transactions for each calendar year.

Specific Instructions A payment settlement entity (PSE) must file Form 1099-K, Payment Card, and Third Party Network Transactions, for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction. And any payment card or third-party network transaction. In case, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.

Payment Settlement Entity

A PSE is a domestic or foreign entity that is a merchant acquiring entity, that is, a bank or other organization that has the contractual obligation to make payment to participating payees in settlement of payment card transactions; or a third party settlement organization (TPSO), that is, the central organization that has the contractual obligation to make payments to participating payees of third party network transactions.

Note. Healthcare networks, in-house accounts payable departments, and automated clearing houses do not qualify as TPSOs and do not report under section 6050W.

Participating Payee

A participating payee is any person, including any governmental unit (and any agency or instrumentality of a governmental unit) who accepts a payment card, or any account number or other indicia associated with a payment card, as payment or accepts payment from a TPSO in settlement of a third party network transaction.

Payment card

A payment card is any card, including any stored-value card (having prepaid value, including gift cards), issued according to an agreement or arrangement that provides for all of the following.

One or more issuers of the cards.

A network of persons unrelated to each other, and to the issuer, who agree to accept the cards as payment.

Standards and mechanisms for settling the transactions between the merchant acquiring entities and the persons who agree to accept the cards as payment.

Form 1099 K Boxes

Box 1a. Gross Payment Card/Third Party Network Transactions

Enter in box 1a the gross amount of the total reportable payment card/third party network transactions for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. The dollar amount of each transaction determined on the date of the transaction.

Exception for de minimis payments

 A TPSO required to report any information concerning third party network transactions of any participating payee only if for the calendar year:

  • The gross amount of total reportable payment transactions exceeds $20,000, and
  • The total number of such transactions exceeds 200.
For examples of reportable payment transactions, including responsible filing parties, see Regulations section 1.6050W-1(e).
Box 1b. Card Not Present Transactions

Enter in box 1b the gross amount of the total reportable payment card/third party network transactions for the calendar year where the card was not present at the time of the transaction or the card number was keyed into the terminal. Typically, this relates to online sales, phone sales, or catalog sales. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. The dollar amount of each transaction determined on the date of the transaction.</p/>

Box 2. Merchant Category Code

Enter the 4-digit merchant category code (MCC) used by the payment card industry to classify the payee for the payment card transactions reported on this Form 1099-K. If you or the entity on whose behalf you are filing uses an industry classification system other than, or in addition to, MCCs, assign to each payee an MCC that most closely corresponds to the description of the payee’s business. Note. If you or the entity on whose behalf you are filing is a TPSO or does not use any industry classification system for its payees, you should not complete this box.

Note. If you or the entity on whose behalf filing is a TPSO or does not use any industry classification system for its payees, you should not complete this box.

If a payee has receipts classified under more than one MCC, you may either:

  • File separate Forms 1099-K reporting the gross receipts for each MCC,or
  • File a single Form 1099-K reporting total gross receipts and the MCC which corresponds to the largest portion of the total gross receipts

 

Box 3. Number of Payment Transactions

Enter the number of payment transactions (not including refund transactions) processed through the payment card/ third party payer network.

Box 4. Federal Income Tax Withheld

Enter backup withholding. Persons who have not furnished their taxpayer identification number to you in the manner required are subject to backup withholding on payments required to be aggregately reported in box 1a.

A payment made by a TPSO is a reportable payment potentially subject to section 3406 backup withholding only if the payee has received payment from the TPSO in more than 200 transactions (the monetary threshold is not considered for this purpose) within a calendar year. There are no limiting thresholds for payments made in the settlement of payment card transactions that subject to section 3406 backup withholding.

For more information on backup withholding, including the applicable rate, see part N in the 2020 General Instructions for Certain Information Returns.

Boxes 5a Through 5l

Enter in the appropriate box the gross amount of the total reportable payment transactions for each month of the calendar year.

Boxes 6 Through 8. State Information

These boxes may be used by filers who participate in the Combined Federal/State Filing Program and/or who required to file paper copies of this form with a state tax department. See Publication 1220 for more information regarding the Combined Federal/State Filing Program. They are provided for your convenience only and need not be completed for the IRS. Use the state information boxes to report payments for up to two states. Keep the information for each state separated by the dashed line. If you withheld state income tax on this payment, you may enter it in box 8. In box 6, enter the abbreviated name of the state. In box 7, enter the filer’s state identification number. The state number is the filer’s identification number assigned by the individual state.

If a state tax department requires that you send them a paper copy of this form, use Copy 1 to provide information to the state tax department. Give Copy 2 to the payee for use in filing the payee’s state income tax return.

IRS 1099 NEC Deadline for 2021

File 2021 1099 NEC form IRS should receive by January 31st, 2022
Payers must issue 1099 – NEC form Copy B to recipients on or before January 31st, 2022

1099 NEC form Paper filing deadline is on January 31st, 2022

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Form 1099 E-filing Deadline For 2021-22 Tax Year

IRS 1099 Tax Forms filed on annual basis. So, file the tax returns within Form 1099 Deadline & stay away from penalties

Payers must issue 1099 – NEC form Copy B to recipients on or before January 31st , 2022.

Efile 1099 NEC Form with IRS by January 31st , 2022.