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1099-K Tips for Reconciling eCommerce Payments

Jan 6, 2017 7:03:00 AM Kathy Dise Bookkeeping, eCommerce

We are seeing 1099-K audits for 2-4 years ago that are extremely time consuming. If you are accepting credit cards and receive a 1099-K from your merchant service provider (PSE), here is some helpful advice.

GettyImages-509104190.jpgWhat 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.”

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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)
Once again, we hope this serves you well, especially in the New Year! If you need help running more detailed sales reports, or tracking your merchant payments, please contact us. I am Kathy Dise, and you can reach me at Happy 2017!
Kathy Dise

Written by Kathy Dise

Kathy has over 30 years experience helping small businesses succeed. As a commercial lender, commercialization expert and now as a QuickBooks diamond level advisor, Kathy understands the challenges small business owners face. Her experience helps business owners quickly accomplish their financial goals. As the owner of BudgetEase, Kathy works with clients to develop a plan to efficiently process 1,000s of small transactions so owners can make informed decisions. She lives in Shaker Heights, OH with her husband Ralph and enjoys golf, curling and walking in Cleveland’s fabulous Metro Parks.