Instructions for IRS Form 1099-k - Payment Card and Third Party Network Transactions 2018

January 1, 2018 "Instructions For Irs Form 1099-k - Payment Card And Third Party Network Transactions" contain the latest filing requirements for the IRS-issued Form 1099-K. Download your copy of the instructions by clicking the link below.

IRS Form 1099-K is tax form released and collected by the Internal Revenue Service of the United States.

ADVERTISEMENT
2018
Department of the Treasury
Internal Revenue Service
Instructions for
Form 1099-K
Payment Card and Third Party Network Transactions
Section references are to the Internal Revenue Code
reportable payment transaction, that is, any payment card
unless otherwise noted.
or third party network transaction, if the PSE submits the
instruction to transfer funds to the account of the
Future Developments
participating payee to settle the reportable payment
transaction.
For the latest information about developments related to
Form 1099-K and its instructions, such as legislation
A PSE is a domestic or foreign entity that is a merchant
enacted after they were published, go to
IRS.gov/
acquiring entity, that is, a bank or other organization that
Form1099K.
has the contractual obligation to make payment to
What’s New
participating payees in settlement of payment card
transactions; or a third party settlement organization
Online pdf fillable Copies 1, B, 2, and C. To ease
(TPSO), that is, the central organization that has the
statement furnishing requirements, Copies 1, B, 2, and C
contractual obligation to make payments to participating
of Form 1099-K have been made fillable online in a pdf
payees of third party network transactions.
format, available at IRS.gov/Form1099K. You can
complete these copies online for furnishing statements to
Note. Healthcare networks, in-house accounts payable
recipients and for retaining in your own files
departments, and automated clearing houses do not
qualify as TPSOs and do not report under section 6050W.
Payments made to an offshore account. For tax years
beginning after December 31, 2017, the criteria for a
A participating payee is any person, including any
participating payee has been modified to exclude certain
governmental unit (and any agency or instrumentality of a
payees with only a foreign address. The Payment
governmental unit) who accepts a payment card, or any
Settlement Entity (PSE) is no longer required to file Forms
account number or other indicia associated with a
1099-K solely because payment is made in U.S. dollars to
payment card, as payment or accepts payment from a
such persons.
TPSO in settlement of a third party network transaction.
Reminder
A payment card is any card, including any stored-value
In addition to these specific instructions, you should also
card (having prepaid value, including gift cards), issued
use the 2018 General Instructions for Certain Information
according to an agreement or arrangement that provides
Returns. Those general instructions include information
for all of the following.
about the following topics.
One or more issuers of the cards.
Who must file (nominee/middleman).
A network of persons unrelated to each other, and to
When and where to file.
the issuer, who agree to accept the cards as payment.
Electronic reporting requirements.
Standards and mechanisms for settling the transactions
Corrected and void returns.
between the merchant acquiring entities and the persons
Statements to recipients.
who agree to accept the cards as payment.
Taxpayer identification numbers (TINs).
Backup withholding.
A third party payment network is any agreement or
Penalties.
arrangement that provides for the following.
Other general topics.
The establishment of accounts with a central
organization by a substantial number of providers of
You can get the General Instructions for Certain
goods or services who are unrelated to the organization
Information Returns at
IRS.gov/UAC/About-Form-1099
or
and who have agreed to settle transactions for the
go to IRS.gov/Form1099K.
provision of the goods or services to purchasers
Frequently asked questions. To find frequently asked
according to the terms of the agreement or arrangement.
questions (FAQs) about Form 1099-K reporting, go to
Standards and mechanisms for settling the
IRS.gov and enter “new payment card reporting” in the
transactions.
search box.
Guarantee of payment to the persons providing goods
or services (participating payees) in settlement of
Specific Instructions
transactions with purchasers pursuant to the agreement
or arrangement.
A PSE must file Form 1099-K, Payment Card and Third
A third party payment network does not include any
Party Network Transactions, for payments made in
agreement or arrangement that provides for the issuance
settlement of reportable payment transactions for each
of payment cards.
calendar year. A PSE makes a payment in settlement of a
Mar 14, 2018
Cat. No. 54721E
2018
Department of the Treasury
Internal Revenue Service
Instructions for
Form 1099-K
Payment Card and Third Party Network Transactions
Section references are to the Internal Revenue Code
reportable payment transaction, that is, any payment card
unless otherwise noted.
or third party network transaction, if the PSE submits the
instruction to transfer funds to the account of the
Future Developments
participating payee to settle the reportable payment
transaction.
For the latest information about developments related to
Form 1099-K and its instructions, such as legislation
A PSE is a domestic or foreign entity that is a merchant
enacted after they were published, go to
IRS.gov/
acquiring entity, that is, a bank or other organization that
Form1099K.
has the contractual obligation to make payment to
What’s New
participating payees in settlement of payment card
transactions; or a third party settlement organization
Online pdf fillable Copies 1, B, 2, and C. To ease
(TPSO), that is, the central organization that has the
statement furnishing requirements, Copies 1, B, 2, and C
contractual obligation to make payments to participating
of Form 1099-K have been made fillable online in a pdf
payees of third party network transactions.
format, available at IRS.gov/Form1099K. You can
complete these copies online for furnishing statements to
Note. Healthcare networks, in-house accounts payable
recipients and for retaining in your own files
departments, and automated clearing houses do not
qualify as TPSOs and do not report under section 6050W.
Payments made to an offshore account. For tax years
beginning after December 31, 2017, the criteria for a
A participating payee is any person, including any
participating payee has been modified to exclude certain
governmental unit (and any agency or instrumentality of a
payees with only a foreign address. The Payment
governmental unit) who accepts a payment card, or any
Settlement Entity (PSE) is no longer required to file Forms
account number or other indicia associated with a
1099-K solely because payment is made in U.S. dollars to
payment card, as payment or accepts payment from a
such persons.
TPSO in settlement of a third party network transaction.
Reminder
A payment card is any card, including any stored-value
In addition to these specific instructions, you should also
card (having prepaid value, including gift cards), issued
use the 2018 General Instructions for Certain Information
according to an agreement or arrangement that provides
Returns. Those general instructions include information
for all of the following.
about the following topics.
One or more issuers of the cards.
Who must file (nominee/middleman).
A network of persons unrelated to each other, and to
When and where to file.
the issuer, who agree to accept the cards as payment.
Electronic reporting requirements.
Standards and mechanisms for settling the transactions
Corrected and void returns.
between the merchant acquiring entities and the persons
Statements to recipients.
who agree to accept the cards as payment.
Taxpayer identification numbers (TINs).
Backup withholding.
A third party payment network is any agreement or
Penalties.
arrangement that provides for the following.
Other general topics.
The establishment of accounts with a central
organization by a substantial number of providers of
You can get the General Instructions for Certain
goods or services who are unrelated to the organization
Information Returns at
IRS.gov/UAC/About-Form-1099
or
and who have agreed to settle transactions for the
go to IRS.gov/Form1099K.
provision of the goods or services to purchasers
Frequently asked questions. To find frequently asked
according to the terms of the agreement or arrangement.
questions (FAQs) about Form 1099-K reporting, go to
Standards and mechanisms for settling the
IRS.gov and enter “new payment card reporting” in the
transactions.
search box.
Guarantee of payment to the persons providing goods
or services (participating payees) in settlement of
Specific Instructions
transactions with purchasers pursuant to the agreement
or arrangement.
A PSE must file Form 1099-K, Payment Card and Third
A third party payment network does not include any
Party Network Transactions, for payments made in
agreement or arrangement that provides for the issuance
settlement of reportable payment transactions for each
of payment cards.
calendar year. A PSE makes a payment in settlement of a
Mar 14, 2018
Cat. No. 54721E
“Unrelated” means any person who is not related to
Regulations section 1.1441-6(c)(2) or are reportable
another person within the meaning of section 267(b) using
under Code sections 6042, 6045, 6049, or 6050N.
the rules of sections 267(c) and (e)(3), and 707(b)(1).
Exception for payments made by U.S. payers or
Exception for payments made outside the United
middlemen to accounts maintained outside the
States by U.S. payers or middlemen to offshore
United States after 2010. A PSE is also not required to
accounts after 2010. For payments under contractual
file Form 1099-K in certain circumstances for payments
obligations entered into after December 31, 2010, a PSE
made to an account maintained outside the United States.
that is a person as described in Regulations section
This exception only applies if the PSE is a U.S. payer
1.6049-5(c)(5) as a U.S. payer or U.S. middleman is not
making a payment to an account maintained outside the
required to file Form 1099-K for payments to a
United States by the PSE, or, if the PSE does not maintain
participating payee with a foreign address as long as,
an account for the payee, to another financial institution
prior to payment, the PSE has documentation on which
maintaining the account outside the United States. To
the PSE may rely to treat the payment as made to a
apply this exception, the PSE must also reasonably
foreign person according to Regulations section
determine that the participating payee is doing business
1.1441-1(e)(1)(ii) (substituting “payer” for the term
outside the United States based on all the information
“withholding agent” and without regard to the limitations to
obtained or reviewed in connection with the establishment
amounts subject to withholding requirements of chapter 3
or maintenance of the contractual relationship with the
of the Code and its regulations).
participating payee (including information required to be
obtained or reviewed under procedures required to be
A PSE must file Form 1099-K for payments made
established under and compliant with 31 CFR §
outside the United States to an offshore account if any of
1020.220). However, a PSE must file Form 1099-K for
the following apply.
payments made to an offshore account if any of the
There is a U.S. residential or correspondence address
following apply.
associated with the participating payee.
There is a U.S. residential or correspondence address
The PSE has standing instructions to direct the
associated with the participating payee.
payment to a bank account maintained in the United
The PSE has standing instructions to direct the
States.
payment to a bank account maintained in the United
The PSE knows or has reason to know that the
States.
participating payee is a U.S. person.
The PSE knows or has reason to know that the
A PSE is not required to file Form 1099-K for payments
participating payee is a U.S. person.
made outside the United States to an offshore account in
A PSE that obtains a valid Form W-8 or documentary
the circumstances described in the preceding paragraph if
evidence establishing the payee's non-U.S. status and
the PSE does not know that the payee is a U.S. person
does not know the payee is a U.S. person is not required
and the PSE obtains from the payee a Form W-8BEN,
to file Form 1099-K even if any of the circumstances
Certificate of Foreign Status of Beneficial Owner for
described in the preceding paragraph are present. For
United States Tax Withholding and Reporting
more information on this exception, see Notice 2012-2,
(Individuals); or Form W-8ECI, Certificate of Foreign
available at IRS.gov/irb/2012-45_IRB#NOT-2012-2.
Person’s Claim That Income Is Effectively Connected
Exception for payments by U.S. payers to foreign
With the Conduct of a Trade or Business in the United
payees prior to 2011. For payments under contractual
States; or documentary evidence establishing the payee’s
obligations entered into before January 1, 2011, a PSE
non-U.S. status; or a suitable substitute form as described
that is a U.S. payer or U.S. middleman is not required to
in Notice 2011-71, available at
IRS.gov/irb/
file a Form 1099-K for a payment to a participating payee
2011-37_IRB#NOT-2011-71. The W-8 forms (or the
with a foreign address as long as the payer does not know
suitable substitutes) must be collected by the PSE no later
or have reason to know that the participating payee is a
than 90 days after the date on which the PSE enters into
U.S. person.
the contractual obligations with the participating payee.
The W-8 forms (or suitable substitutes) and documentary
A foreign address means any address that is not within
evidence may be relied upon only when the requirements
the United States (the States and the District of
described in Notice 2011-71 are satisfied.
Columbia).
Exception for payments made by non-U.S. payers
A PSE does not have to file Form 1099-K for payments
or middlemen to foreign payees. A PSE that is not
made outside the United States (within the meaning of
described as a U.S. payer or U.S. middleman in
Regulations section 1.6049-5(e)) to an offshore account
Regulations section 1.6049-5(c)(5) is not required to file a
(as described in Notice 2012-2) of a participating payee
Form 1099-K for payment to a participating payee that
with only a foreign address if the name of the participating
does not have a U.S. address as long as the PSE does
payee indicates that it is a per se corporation under
not know or have reason to know that the participating
Regulations section 301.7701-2(b)(8)(i) and the PSE does
payee is a U.S. person. If the participating payee has any
not know or have reason to know that the participating
U.S. address, the PSE may treat the participating payee
payee is a U.S. person.
as a foreign person only if the PSE has documentation on
A PSE may apply the grace period rules under
which the PSE may rely to treat the payment as made to a
Regulations section 1.6049-5(d)(2)(ii) for payments to a
foreign person according to Regulations section
participating payee with only a foreign address without
1.1441-1(e)(1)(ii).
regard to whether the amounts paid are described in
-2-
Instructions for Form 1099-K (2018)
A PSE that is a non-U.S. payer that has reason to know
the instruction to transfer funds must file the return.
but not actual knowledge that a participating payee is a
However, the PSE obligated to file may designate another
U.S. person will not be required to file Form 1099-K if the
person to file the return, including the PSE not making
PSE obtains from the payee a Form W-8 or documentary
payment, if the parties agree in writing. If the designated
evidence that satisfies the requirements described in
person fails to timely file the return, the entity with the
Notice 2011-71.
responsibility to file is liable for any applicable penalties
under sections 6721 and 6722.
A PSE may accept a substitute form, as described in
Electronic payment facilitator. If a PSE contracts
Notice 2011-71, in lieu of Form W-8BEN so that a
with an electronic payment facilitator (EPF) or other third
participating payee can certify its non-U.S. status.
party to make payments in settlement of reportable
Documentary evidence, described in Notice 2011-71,
payment transactions on behalf of the PSE, the facilitator
submitted to establish the identity of the payee and the
or other third party must file Form 1099-K in lieu of the
status of that person as a foreign person remains valid
PSE. The facilitator is not required to have any
until the earlier of the last day of the third calendar year
arrangement or agreement with the participating payee.
following the year in which the documentary evidence is
Payments need not come from the facilitator's account.
provided to the withholding agent or the day that a change
The facilitator need only submit instructions to transfer
in circumstances occurs that makes any information on
funds to the account of the participating payee. The PSE
the documentary evidence incorrect.
can file Form 1099-K by designation if the parties agree in
A U.S. address is any address that is within the United
writing; however, the designation does not relieve the
States (the States and the District of Columbia).
facilitator from liability for any applicable penalties under
Non-reportable transactions. The following
sections 6721 and 6722 for failure to comply with the
transactions are non-reportable under section 6050W.
information reporting requirements.
A withdrawal of funds at an automated teller machine
See part O in the 2018 General Instructions for Certain
(ATM) via payment card, or a cash advance or loan
Information Returns for more information on penalties.
against the cardholder's account.
A check issued in connection with a payment card that
Aggregated payees. If you receive payments from a
is accepted by a merchant or other payee.
PSE on behalf of one or more participating payees and
Any transaction in which a payment card is accepted as
you distribute such payments to one or more participating
payment by a merchant or other payee who is related to
payees, you are:
the issuer of the payment card.
The participating payee with respect to the PSE who
sent you the payment(s), and
Conversion of amounts paid in foreign currency.
The PSE with respect to the participating payees to
When a payment is made or received in a foreign
whom you distribute the payments.
currency, the U.S. dollar amount must be determined by
converting the foreign currency into U.S. dollars on the
For more information on nominee/middleman reporting,
date of transaction at the spot rate (as defined in
see part A in the 2018 General Instructions for Certain
Regulations section 1.988-1(d)(1)) or according to a
Information Returns.
reasonable spot rate convention, such as a month-end
Statements to Payees
spot rate or a monthly average spot rate. The convention
must be used consistently for all non-dollar amounts
If you are required to file Form 1099-K, you must furnish a
reported and from year to year. The convention cannot be
statement to the payee.
changed without the consent of the Commissioner or his
Truncating recipient’s TIN on payee statements.
or her delegate.
Pursuant to Treasury Regulations section 301.6109-4, all
Reporting under sections 6041, 6041A, and 6050W.
filers of this form may truncate a payee’s TIN (social
Payments made by payment card or through a third party
security number (SSN), individual taxpayer identification
payment network after December 31, 2010, that otherwise
number (ITIN), adoption taxpayer identification number
would be reportable under sections 6041 (payments of
(ATIN), or employer identification number (EIN)) on payee
$600 or more) or 6041A(a) (payments of remuneration for
statements. Truncation is not allowed on any documents
services and certain direct sales) and 6050W are reported
the filer files with the IRS. A filer's TIN may not be
under section 6050W and not sections 6041 or 6041A.
truncated on any form. See part J in the 2018 General
For purposes of determining whether payments are
Instructions for Certain Information Returns.
subject to reporting under section 6050W, rather than
Furnishing statements electronically. Statements may
sections 6041 or 6041A, the de minimis threshold,
be furnished to payees electronically in lieu of a paper
discussed later under Box 1a, is disregarded.
format. See Regulations section 1.6050W-2(a) for further
information.
Who Must File
For more information about the requirement to furnish a
Every PSE or other party which submits instructions to
statement to each payee, see part M in the 2018 General
transfer funds to the account of a participating payee, in
Instructions for Certain Information Returns.
settlement of reportable payment transactions, must file
an information return (Form 1099-K) with respect to each
2nd TIN Not.
participating payee for that calendar year.
You may enter an “X” in this box if you were notified by the
Multiple PSEs. If two or more persons qualify as PSEs
IRS twice within 3 calendar years that the payee provided
for the same reportable transaction, the PSE that submits
an incorrect taxpayer identification number (TIN). If you
-3-
Instructions for Form 1099-K (2018)
mark this box, the IRS will not send you any further
Box 1a. Gross Payment Card/Third Party
notices about this account.
Network Transactions
Enter in box 1a the gross amount of the total reportable
However, if you received both IRS notices in the same
payment card/third party network transactions for the
year, or if you received them in different years but they
calendar year. Gross amount means the total dollar
both related to information returns filed for the same year,
amount of total reportable payment transactions for each
do not check the box at this time. For purposes of the
participating payee without regard to any adjustments for
two-notices-in-3-years rule, you are considered to have
credits, cash equivalents, discount amounts, fees,
received one notice and you are not required to send a
second “B” notice to the taxpayer on receipt of the second
refunded amounts, or any other amounts. The dollar
notice. See part N in the 2018 General Instructions for
amount of each transaction is determined on the date of
Certain Information Returns for more information.
the transaction.
Exception for de minimis payments. A TPSO is
For information on the TIN Matching System
required to report any information concerning third party
offered by the IRS, see the 2018 General
TIP
Instructions for Certain Information Returns.
network transactions of any participating payee only if for
the calendar year:
The gross amount of total reportable payment
FILER'S Name, Address, Telephone Number,
transactions exceeds $20,000, and
and TIN Boxes
The total number of such transactions exceeds 200.
Enter the name, address (including street address, city or
For examples of reportable payment transactions,
town, state or province, country, and ZIP or foreign postal
including responsible filing parties, see Regulations
code) and telephone number of the entity with the filing
section 1.6050W-1(e).
requirement (payer) in the box in the upper left corner.
The telephone number must allow a payee to reach a
Box 1b. Card Not Present Transactions
person knowledgeable about the payments reported on
Enter in box 1b the gross amount of the total reportable
the form. Enter the TIN (EIN) of the entity with the filing
payment card/third party network transactions for the
requirement (payer) in the top box immediately to the
calendar year where the card was not present at the time
right.
of the transaction or the card number was keyed into the
terminal. Typically, this relates to online sales, phone
FILER Check Boxes
sales, or catalogue sales. Gross amount means the total
Check the first (top) box in the section immediately below
dollar amount of total reportable payment transactions for
the FILER'S name, street address, city or town, state or
each participating payee without regard to any
province, country, ZIP or foreign postal code, and
adjustments for credits, cash equivalents, discount
telephone number box if the entity with the filing
amounts, fees, refunded amounts, or any other amounts.
requirement (payer) is a PSE. Check the second (bottom)
The dollar amount of each transaction is determined on
box if the entity with the filing requirement (payer) is an
the date of the transaction.
EPF or other third party.
Box 2. Merchant Category Code
If the entity with the filing requirement (payer) is an EPF
or other third party, enter the PSE's name and telephone
Enter the 4-digit merchant category code (MCC) used by
number in the box above the account number box at the
the payment card industry to classify the payee for the
bottom left of the form. The telephone number must allow
payment card transactions reported on this Form 1099-K.
a payee to reach a person knowledgeable about the
If you or the entity on whose behalf you are filing uses an
payments reported on the form.
industry classification system other than, or in addition to,
MCCs, assign to each payee an MCC that most closely
Transactions Reported Check Boxes
corresponds to the description of the payee's business.
Check the first (top) box if you are reporting payment card
Note. If you or the entity on whose behalf you are filing is
transactions on this form. Check the second (bottom) box
a TPSO or does not use any industry classification system
if you are reporting third party network transactions on this
for its payees, you should not complete this box.
form.
If a payee has receipts classified under more than one
If you are reporting payments to the same payee that
MCC, you may either:
include both payment card and third party network
File separate Forms 1099-K reporting the gross
transactions, you must file a separate Form 1099-K
receipts for each MCC, or
reporting the gross amount from each type.
File a single Form 1099-K reporting total gross receipts
Account Number
and the MCC which corresponds to the largest portion of
the total gross receipts.
The account number is required if you have multiple
accounts for a payee for whom you are filing more than
Box 3. Number of Payment Transactions
one Form 1099-K. Additionally, the IRS encourages you
Enter the number of payment transactions (not including
to designate an account number for all Forms 1099-K that
refund transactions) processed through the payment card/
you file. See part L in the 2018 General Instructions for
third party payer network.
Certain Information Returns.
-4-
Instructions for Form 1099-K (2018)
Box 4. Federal Income Tax Withheld
Boxes 6 Through 8. State Information
Enter backup withholding. Persons who have not
These boxes may be used by filers who participate in the
furnished their TIN to you in the manner required are
Combined Federal/State Filing Program and/or who are
subject to backup withholding on payments required to be
required to file paper copies of this form with a state tax
aggregately reported in box 1a.
department. See Pub. 1220 for more information
regarding the Combined Federal/State Filing Program.
A payment made by a TPSO is a reportable payment
They are provided for your convenience only and need
potentially subject to section 3406 backup withholding
not be completed for the IRS. Use the state information
only if the payee has received payment from the TPSO in
boxes to report payments for up to two states. Keep the
more than 200 transactions (the monetary threshold is not
information for each state separated by the dash line. If
considered for this purpose) within a calendar year. There
you withheld state income tax on this payment, you may
are no limiting thresholds for payments made in
enter it in box 8. In box 6, enter the abbreviated name of
settlement of payment card transactions that are subject
the state. In box 7, enter the filer's state identification
to section 3406 backup withholding.
number. The state number is the filer's identification
For more information on backup withholding, including
number assigned by the individual state.
the applicable rate, see part N in the 2018 General
Instructions for Certain Information Returns.
If a state tax department requires that you send them a
paper copy of this form, use Copy 1 to provide information
Boxes 5a Through 5l
to the state tax department. Give Copy 2 to the payee for
use in filing the payee's state income tax return.
Enter in the appropriate box the gross amount of the total
reportable payment transactions for each month of the
calendar year.
-5-
Instructions for Form 1099-K (2018)

Download Instructions for IRS Form 1099-k - Payment Card and Third Party Network Transactions 2018

1305 times
Rate
4.3(4.3 / 5) 91 votes
ADVERTISEMENT
Page of 5