What is a PSE?That is a payment settlement entity, such as:
- Payment processors like Visa or Mastercard, or
- Third party networks like eBay, Google Wallet or PayPal
The PSE is responsible for accurately reporting each retailer’s annual gross income to the IRS on a form 1099-K. This pertains to those e-commerce businesses that receive payment through credit cards and, according the IRS’s website:
“The minimum reporting thresholds of greater than $20,000 and more than 200 transactions apply only to payments settled through a third-party network; there is no threshold for payment card transactions.”
What to do when you receive a 1099-K
- Ensure you have accurate records on each payment (credit, debit, gift cards & stored value cards, and all third party payments) you collect over the course of the year.
- Keep detailed bookkeeping documentation that accurately reflects both income and deductions.
- Reconcile each 1099-K and verify the total amount matches your total gross income reported in the books.
- Remember, this amount does not include shipping, returns, credits, or other related expenses.
- Ideally, you can get the processor to send you daily reports of those transactions to tie into your bookkeeping software.
- If there are discrepancies, contact the PSE for a corrected version of the 1099-K
- Amount Errors: Contact the filer (top left)
- Merchant or 3rd party network (bottom left corner)