Many online marketplaces are responsible for submitting 1099-misc forms to the IRS for any sub-vendors that makes more than $600 a year on their platform.
As a payment processor, Balanced is responsible for reporting 1099-K forms to the IRS for merchants selling goods or services on our marketplace partners’ platforms, but only when those merchants make more than $20,000 from 200+ transactions in a year.
- What is nonemployee compensation? If the following four conditions are met, you must generally report a payment as nonemployee compensation.
- You made the payment to someone who is not your employee;
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation; and
- You made payments to the payee of at least $600 during the year.
Beginning in January, 2012, payment settlement entities (PSEs) are required by the Housing Assistance Tax Act of 2008 to report on Form 1099-K for the following transactions.
Payments in settlement of third party network transactions IF:
- Gross payments to a participating payee exceed $20,000; AND
- There are more than 200 transactions with the participating payee.
What this means for Balanced customers:
Balanced, not the marketplace, is responsible for submitting tax forms to the IRS for all transactions that we process. For example, if a merchat on Gittip makes $601 this year from transactions processed via Balanced, neither Gittip nor Balanced will need to submit anything to the IRS. If the merchant makes $20,001 from 200 transactions, Balanced will submit a 1099-K to the IRS and the merchant. Marketplaces processing their merchants’ transactions through Balanced will never need to submit 1099s.
EDIT: Added the last section to clarify some common questions I was receiving.