Clarification to the Instructions for Schedule C, E, & F (Form 1040) on Reporting Form 1099-K Amounts -- 31-JAN-2012
For tax year 2011 the IRS has deferred the requirement to separately report the amount of merchant card and third party network payments from Form 1099-K on your tax return. Instead, you should report all gross receipts of your trade or business as usual on the line indicated on Schedules C and/or E. Also, as indicated on the form, you should enter zero on the "Merchant card and third party payments" line immediately above the gross receipts line on Schedules C and E. If you file Schedule F, enter zero, as indicated, on the lines for "specified" items of income. Report items that qualify as a trade or business expense on the appropriate line item of Schedules C, E and F.
Line 2 of Schedule C states "Returns and allowances plus any other adjustments (see instructions)". The text "plus any other adjustments" was added for taxpayers who had to adjust the amount on the "Merchant card and third-party payments" line (line 1a of Schedule C). Because all filers are now to enter zero on line 1a of Schedule C, there are no other adjustments to enter on line 2 of Schedule C other than returns and allowances. The instructions for line 2 of Schedule C were removed. Filers should complete line 2 of Schedule C as if it only said "Returns and allowances."
Please note that the deferral of the requirement to separately report the amount of merchant card and third party network payments from the Form 1099-K does not change the requirement for responsible entities to file the Forms 1099-K for 2011.