‘Tax Explainer: How 1099-K affects small businesses’
When you pay by credit card, it's not necessary to issue 1099s to your vendors.
3 min read

Education

31 January 2024

Tax Explainer: How 1099-K affects small businesses

Angie M Grainger

When you pay a vendor using a credit card, you do not need to send them a Form 1099. Instead, the credit card processing company will handle the reporting. Here’s how it works:

  • Credit Card Payments: If you make payments to a vendor using a credit card, debit card, or other payment cards, these transactions are not subject to reporting on Form 1099-MISC or 1099-NEC.

  • Form 1099-K: The payment settlement entity, which is typically the credit card processing company, is responsible for reporting these transactions. They will issue a Form 1099-K to the vendor if required.

  • Exclusion from 1099-MISC and 1099-NEC: Payments made via credit cards, debit cards, or third-party systems (such as PayPal) are excluded from the calculations for both Form 1099-MISC and Form 1099-NEC. This relieves small businesses from having to issue 1099s in many cases.

Remember however, that you are responsible to report all your income, whether or not you receive a 1099 from any source. Don't wait to receive 1099s to figure out your income.

Keeping good books all year not only helps with taxes, it helps with knowing where your money is going through out the year.

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