When you begin accepting credit card payments, you open your business to a greater stream of revenue, but it comes with a few extra complications. In addition to handling the day to day maintenance of your merchant account, you also need to make sure you are complying with IRS rules and regulations when you file your taxes. Although it’s a relatively new requirement, the 1099-K is an important form you’ll want to be aware of if you accept credit, debit, and gift card payments.

In 2008 Congress added an unrelated amendment to the Housing Assistance Tax Act that requires businesses to report all card payments as a way to increase voluntary tax compliance and ensure that all income is reported accurately, especially for those accepting payments online. The 1099-K form is used to report your payment transactions and includes the gross amount of all reportable payment transactions. It also includes any third party payment network transactions in which the total exceeds $20,000 and includes more than 200 transactions.

This information must be reported on your income tax return and should be included when calculating the full business income for the year. While the IRS was lenient about this addition to begin with, they have begun contacting businesses whose gross business income is less than the amount reported on their 1099-K.

It is important to check your merchant statements to make sure that the 1099-K accurately reflects your payments received for the year including your total gross payment. There are several situations that may cause this amount to be incorrect including:

• If you shared your credit card terminal with another person or business
• If you bought or sold your business during the year
• If you changed your business structure during the year (e.g., converting from a sole proprietorship to a partnership

If your total gross payment is incorrect, contact your payment service provider to report inaccuracies and receive a corrected form. You can also contact your processor if you need copies of your merchant statements or a copy of the 1099-K itself.