Do you drive for Uber, Lyft or some other rideshare company? Do you receive third-party payments from credit card companies? These are a few scenarios in which you may receive a 1099-K.
If you have income reported on a 1099-K, then chances are that you are not an employee, but an independent contractor for that payor. That means that you are self-employed. You are responsible for paying all your federal, state and employment taxes on that income.
Income received in the course of your trade or business from payment settlement entities is reported on Form 1099-K (ex. rideshare income, credit/debit sales, online and digital payments). This form should aid you in completing Schedule C, Schedule E or Schedule F. Generally, the amount in box 1, minus any adjustments for refunds, discounts and other adjustments, goes on the gross income line of the particular schedule.
Here is a brief summary of some 1099-K line items:
- Box 1a. Gross Amount of Payment Card/Third Party Network Transactions
- Gross payments initiated for the calendar year and is reported on Form 1040, Schedule C, E or F. The gross amount does not account for refunds, discounts or other adjustments.
- Box 1b. Card Not Present Transactions
Gross charges made without a credit/debit card present at the time of transaction.
- Box 3. Number of Payment Transactions
The number of payments initiated for the calendar year.
- Box 4. Federal Income Tax Withheld
This section is for backup withholding. If you did not provide the payor with your tax identification number (TIN), then they may withhold federal income taxes from your 1099-K income. Your TIN helps the IRS track all reported income that has been paid to you. The backup withholding helps to insure that taxes will be paid on income that is not tied to a TIN.
- Boxes 5a-5l. January Through December
Monthly breakout of gross payments initiated for the calendar year.