I received a Form M-1099-K notice from an online payment company. They said it was required by Massachusetts. What is a Form M-1099-K?
Form M-1099-K is used by credit card companies and third-party processors like PayPal to report the payment transactions they process for retailers or other third parties.
Why did I receive this form (M-1099-K)?
You received a Form M-1099-K because a third party payment processor (TPSO) paid more than $600 to you in the previous calendar year. You may not have received one previously because the threshold for reporting in Massachusetts has changed. Each year, people working as traditional employees receive a W-2, and people working as contractors receive a Form 1099-MISC, as long as earnings are above a $600 threshold. Those notifications help people prepare taxes more easily and accurately. People who are paid through companies such as Uber, Lyft or other “new economy” businesses often do not receive a W-2 or Form 1099-MISC. What we have done with the Form M-1099-K is apply the same $600 threshold that applies to the Form 1099-MISC, so that the financial processors provide more information to our residents.
Is this a new tax?
This notice is not associated with any new tax. It is intended strictly to notify recipients that payments were made to them.
What is the difference between Form M-1099-K & Form 1099-MISC?
Form M-1099-K is used by credit card companies and third-party processors to report the payment transactions they process for retailers or other third parties. Form 1099-MISC is generally used to report payments made directly to independent contractors.
Since I received a Form M-1099-K notice, does that mean I owe tax? What do I need to do?
It depends on whether the payment was income that is subject to tax. Form M-1099-K is an informational document. You should use the information reported in conjunction with your other records to determine whether it’s taxable income and to determine your correct tax. Here are four examples:
- Mike works part-time as an independent driver for hire, and, over the course of a year, receives income of $9,789 via a TPSO. The $9,789 should be included when calculating gross receipts for his income tax return. He may be able to deduct certain business expenses.
- Meghan is downsizing her home and sells furniture on an auction site for $5,000. The original purchase price of the furniture was $9,000. The $5,000 IS NOT subject to tax or any reporting as it is a function of selling personal items at a loss.
- Mario, a full-time accountant, also has a hobby selling hand-painted holiday decorations on an auction site. He sells $3,268 worth of decorations over the course of the year. That $3,268 amount should be included when calculating gross receipts for his income tax return. He may be able to deduct certain expenses.
- Molly goes to dinner with her 14 graduate school classmates to celebrate the end of the term. She pays for a $1,500 meal on her credit card and her classmates reimburse her for the expense via a peer-to-peer payment system, totaling $1,400. That $1,400 IS NOT subject to tax or any reporting as it was not payment for goods or services, but simply reimbursement.
- (617) 887-6367 (Personal Income)
(800) 392-6089 (toll-free in Massachusetts)