Form 1099-K Frequently Asked Questions: Filing

A. Yes. Forms 1099-K can be filed electrically through the FIRE (Filing Information Returns Electronically) system. Any person that files 250 or more Forms 1099-K for any calendar year must file those Forms 1099-K electronically. The IRS encourages filers who have less than 250 information returns to file electronically as well. 

For more information, review Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G ElectronicallyPDF. If you are considering filing on paper, review General Instructions for Certain Information Returns.

A. Yes. With the participating payee’s prior consent, payee statements may be provided electronically. This consent must be made electronically in a way that shows the recipient can access the statement in the electronic format in which it will be furnished (see Treas. Reg. 1.6050W-2, Electronic furnishing of information statements for payments made in settlement of payment card and third party network transactionsPDF, for instructions for receiving consent from participating payees). If a payee statement is furnished electronically, an email address for the payment settlement entity may be provided in lieu of a phone number.

A. The merchant acquiring entity that transfers funds to the participating payee is responsible for reporting the gross amount of reportable transactions.

A merchant acquiring entity can outsource the processing of the transactions to a processor that may share the contractual obligation to pay the merchant. When both a merchant acquiring entity and a processor have a contractual obligation to pay the merchant, the entity that submits the instructions to transfer funds to the merchant's account is responsible for preparing and furnishing a payee statement to the participating payee and filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.

A. The third party settlement organization or its electronic payment facilitator is responsible for reporting the gross amounts of reportable transactions paid to participating payees in their network.

A. Yes. There is a de minimis exception from reporting for third party settlement organizations with respect to third party network transactions.  The threshold was lowered by law for calendar years beginning after 2021; however, on December 23, 2022, the IRS announced it was delaying implementation of the lower threshold and would treat calendar year 2022 as a transition year for filers in which the prior (higher) threshold would apply. Therefore, for calendar year 2022, third-party settlement organizations are only required to issue Forms 1099-K to report transactions where gross payments to a participating payee for goods and services during the calendar year exceed $20,000 and there are more than 200 transactions. See Notice 2023-10, Revised Timeline Regarding Implementation of Amended Section 6050W(e), which delayed a change to the de minimis exception from reporting third party network transactions that would have required reporting if payments to a participating payee for goods and services during the calendar year exceeded $600.

A. No. There is not a de minimis exception for reporting payment card transactions. ALL payment card transactions must be reported on Form 1099-K.

A. It depends. Sales paid for by stored-value cards or gift cards are:

• Reportable if the card is accepted by a network of persons unrelated to the issuer and each other.
• Not reportable when the card is only accepted as payment by the issuer or someone who is related to the issuer of the card (e.g., a subsidiary company or the company itself). Under these circumstances, the stored-value cards do not fit the definition of a payment card and sales made with such cards are therefore not reportable.

For the definition of unrelated persons see IRC 267(b), Relationships, of the Internal Revenue Code, and IRC 267(e)(3), Constructive Ownership in the Case of Partnerships, or IRC 707(b)(1), Certain Sales or Exchanges of Property with Respect to Controlled Partnerships, Losses Disallowed.

A. The most common example of this situation is when a franchisor processes all the merchant card transactions of multiple franchisees and distributes payments accordingly. For example, when a corporation receives payments from a bank on behalf of multiple payees, the corporation is treated as a participating payee with respect to the bank and as a payment settlement entity with respect to the payees to whom the corporation distributes the payments. The bank is required to report the gross amount of reportable transactions settled through the corporation. In turn, the corporation is required to report the allocable transactions of the payees to whom the corporation distributes the payments. Under the statute and regulations, the corporation is an “aggregated payee.”

A. Yes. However, the entity responsible for filing (i.e., the entity that submits the instructions to transfer funds) is liable for any applicable penalties under IRC 6721, Failure To File Correct Information Returns, and IRC 6722, Failure To Furnish Correct Payee Statements, if the reporting requirements are not met. In addition, the name, address and Taxpayer Identification Number of the entity responsible for filing must be reported on Form 1099-K, Payment Card and Third Party Network Transactions, in the box for the filer's information.