Our Mommyhood

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Moms have it tough as it is. And business-owning moms are stretched even more thin – between picking up the kids and balancing the business budget, you squeeze in a few hours of sleep before going right back to work. Clearly, you have enough on your plate already.

So why would the IRS try to sabotage your life by giving you more stuff to do this tax season?

It’s true. If you haven’t heard, there’s a new tax form that should be in your mailbox very soon (if not already). It’s the 1099-K, also known as the PayPal 1099 or Amazon 1099. Whatever the name, the 1099-K is yet another thing to worry about before that fateful mid-April tax deadline.

So what’s the story behind this mysterious document? And just how much work is it going to add to your workload this year?

1099-K Origins 

Though it seems that – like the mystery smell in the backseat of the car – it came out of nowhere, the origins of the 1099-K go back a few years. The United States has always suffered from what’s known as the “tax gap.” This term just means the difference between income actually earned in this country and income actually reported to the IRS. This is why, for instance, businesses are required to send out W-2’s to employees and 1099’s to contractors. By 2008, congress suspected that the rise of ecommerce selling was causing quite a sizeable tax gap, as people made money through sources like eBay and Amazon but – perhaps – didn’t report that income. Thus, with the passing of the 2008 Housing Assistance Tax Act, Congress also required that payment processors like PayPal issue form 1099-K to people who receive income through those sources. This form is also sent to the IRS so they can know what to expect when ecommerce sellers file their tax returns.

So if you’ve ever filed as an ecommerce pro before, prepare for things to be a little different from now on. That is, unless…

Stipulations

The new 1099-K tax form does come with some catches. For one, not everybody who made a few bucks from PayPal here and there gets it! Only select online sellers will receive the form in the mail soon.

There are two big criterias you must meet if you are to get the 1099-K:

• Must have made over $20,000 through Amazon, PayPal, etc.
• That $20K must have been made through 200 or more transactions

If you don’t meet either one of those criteria, then you won’t get the form in the mail. If you do get it, though, it’s no reason to throw the baby out with the bathwater! The only thing the 1099-K reports to you is how much money you made through your ecommerce ventures. That’s it! So it should be the same amount as your own personal records.

Remember, this new tax form came about simply because congress wanted to catch ecommerce pros who weren’t paying their way. Reporting should be the same – just remember to take out all the deductions and exemptions you need, as the 1099-K doesn’t report those.

So although you’re super swamped already and may feel like you can’t take on anymore, this new tax form shouldn’t send you over the edge. And if this news does send you running around the room like a 2-year-old with a lollipop, then please visit our Tax Resource Center for more information on 1099-K in particular and self-employment taxes in general!

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