PAYPAL AND CREDIT CARD MERCHANTS TO ISSUE FORM 1099-K

January 17, 2012

The IRS has mandated that credit card merchant processors and PayPal issue Form 1099-K in 2011. Reporting on your tax returns in not effective for 2011 as the IRS could not get their systems in place that soon, although they revised all business forms to include a gross receipt line for credit card/PayPal (merchant services) receipts.

For 2012, it will be a requirement to separately track the credit card payments from cash/checks as the information will be reported separately on the corporate, partnership, individual sole-proprietorships, and individually owned rental real estate income tax returns in the income section. Somehow the sales tax, tips and returns and allowances will have to be backed out of this amount in the new "other" box. We are hoping for further guidance by the IRS to assist in reporting this correctly.

This is a heads up since as of 1/1/12, the chart of accounts, invoices, and recording of transactions should likely be adjusted to gather the needed data.

Please note that if we do your bookkeeping, our office will implement this change. However, if we do not do your bookkeeping, you should consider making these changes immediately so that 2012 will be a smooth transition.

Please contact our office if you have any questions.