If you use Square to process payments for your business, you may receive a 1099-K form during tax season. This form is crucial for reporting your business income and ensuring compliance with IRS regulations. Here’s everything you need to know about the Square 1099-K, including how to obtain it and what to do with it.
What Is a 1099-K Form?
The 1099-K is an IRS tax form used to report payments processed through third-party networks, such as Square, PayPal, and Stripe. It details the total payments received through these platforms in a given tax year. The IRS uses this information to verify that businesses are accurately reporting their income.
Who Receives a 1099-K from Square?
Not all Square users will receive a 1099-K. As of 2024, the IRS requires Square to issue this form if you meet the following criteria:
- You have received more than $600 in payments through Square in a calendar year.
Previously, the threshold was $20,000 and 200 transactions, but this was reduced to $600 to increase tax compliance among small businesses and independent contractors.
How to Get Your Square 1099-K
If you qualify, Square will provide your 1099-K electronically or via mail. Here’s how you can access it:
- Log in to Your Square Dashboard:
- Go to Square’s website and log into your account.
- Navigate to Tax Forms:
- Click on “Account & Settings” > “Business” > “Tax Forms.”
- Download Your 1099-K:
- If eligible, you’ll see the form available for download.
- Check Your Email:
- Square also sends notifications when your tax forms are available.
What to Do with Your 1099-K
Once you have your 1099-K, here’s what you should do next:
- Compare with Your Records: Ensure the total payments reported match your business records. If there are discrepancies, reach out to Square for clarification.
- Report on Your Tax Return: Include the income on your Schedule C (if you’re a sole proprietor) or the relevant section for your business type.
- Account for Fees and Deductions: Square reports gross payments, meaning transaction fees are included in the total. You can deduct these fees as business expenses when filing your taxes.
Common Issues and How to Resolve Them
- Missing 1099-K: If you expect to receive a 1099-K but don’t, check your Square account settings and ensure your tax information is up to date.
- Incorrect Information: If your form contains errors, contact Square support to request corrections.
- Multiple Payment Processors: If you use multiple platforms (e.g., PayPal and Stripe), be sure to report all 1099-Ks and reconcile your total earnings.
Final Thoughts
Receiving a 1099-K from Square means the IRS is aware of your business earnings. Keeping accurate records and properly reporting income will help you stay compliant and avoid potential penalties. If you’re unsure how to handle your 1099-K, consider consulting a tax professional for guidance.