Form 1099-K reporting requirements
Third party settlement organizations (“TPSOs”) must report the gross amount paid in settlement to a payee with a Massachusetts address using Form 1099-K when the gross amount paid in settlement in a calendar year is $600 or greater and is subject to taxation under G.L. c. 62, regardless of the number of transactions between the TPSO and the payee. Note that this reporting requirement differs from that imposed by the Internal Revenue Service (“IRS”), which requires that a TPSO file Form 1099-K with respect to a payee to whom the TPSO makes payments in settlement exceeding $20,000 and the number of transactions between the TPSO and the payee exceeds 200 in a calendar year.
Third Party Settlement Organizations (TPSOs)
The Massachusetts-specific Form 1099-K reporting requirements apply to third party settlement organizations, or TPSOs. A TPSO is a central organization with a contractual obligation to make payments in settlement to payees participating in a third party payment network. A third party payment network is an organization with which a substantial number of unrelated providers of goods and services have established an account, that has agreed to settle transactions between providers and purchasers using certain established mechanisms and standards, often for a fee, and which guarantees payment in settlement for such transactions.
The Massachusetts Form 1099-K reporting requirements for merchant acquiring entities, which also report gross amounts paid in settlement to payees using Form 1099-K, remain unchanged. In general, merchant acquiring entities are banks or other organizations that have a contractual obligation with payees to make payments in settlement for payment card transactions.
Payments subject to reporting
A TPSO may not know whether a payment made in settlement is subject to tax under G.L. c. 62 (the Massachusetts personal income tax), either because it lacks information regarding the Massachusetts tax type applicable to the payee, or because it lacks information as to the nature of the payment. In such a case, the TPSO should report payments meeting the reporting threshold that are made to any payee using a Massachusetts address.
Compliance with the requirements
For calendar year 2017 reporting, the Department recognized that in some cases a business may have been unable to comply fully with the new rules by the applicable due dates, despite a good faith effort to do so. In such cases, the Department was willing to work with the business to provide relief, including waiving penalties where appropriate. Beginning with calendar year 2018 reporting, however, the Department expects full compliance with the requirements.
Payments subject to Massachusetts reporting but not to federal reporting
Where a TPSO has a Massachusetts Form 1099-K reporting obligation but is not required to file Form 1099-K with the IRS, a TPSO may file with the Department using Massachusetts Form 1099-K or IRS Form 1099-K.
Submission of Forms 1099-K to DOR using the Combined Federal/State Filing Program
Where amounts paid in settlement to a payee in a calendar year meet both the IRS and Massachusetts Form 1099-K thresholds, a TPSO may use the Combined Federal/State Filing Program to file Form 1099-K with the Department. Where amounts paid in settlement in a calendar year to a payee meet the Massachusetts threshold but not the IRS threshold, a TPSO should submit Form 1099-K to the Department directly using MassTaxConnect (MTC).
For a TPSO with some payees meeting both thresholds and some payees meeting only the Massachusetts threshold, the TPSO may use the Combined Federal/State Filing Program to file those forms meeting the IRS threshold, or may submit its entire 1099-K file through MTC. A TPSO filing fewer than 50 Forms 1099-K annually may also submit Forms 1099-K on paper by mailing them to:
Massachusetts Department of Revenue
P.O. Box 7045
Boston, MA 02204
- (617) 887-6367 (Personal Income)
(800) 392-6089 (toll-free in Massachusetts)