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A New Take on Income Taxes

New 1099-K form for tax reporting will create a clear paper trail of online revenue.

A new Internal Revenue Service requirement that small businesses report their online sales through Form 1099-K takes effect with the coming tax-reporting season.

Form 1099-K, being distributed to small businesses this month, is intended to make revenue tracking easier for the IRS.

“You might call it a paperwork burden that’s being placed on the small business now because the government wants to ensure that they have the ability to verify the amount that the small businesses are earning,” says Steven Aldrich, CEO of, a vendor of online accounting software.

The form will be required of small businesses that have at least $20,000 in revenue and 200 transactions or more from a given payment processor, he says. All payment processors, including Amazon and PayPal, must send the form to each merchant that falls under the ruling.

The form will report the merchant’s processed gross revenue, which will require the merchant to figure out the net income from that reported revenue.

“That is now the burden that the small-business owner has to deal with when they are getting their taxes together for 2011,” Aldrich says.

About the author

Sarah Brown
Sarah Brown is a freelance writer who writes about e-commerce and small businesses. She recently graduated from Chico State with a journalism degree and is also a budding online entrepreneur, having launched two Web businesses and her own line of handmade products. Opinions expressed here may not be shared by The Online Seller and/or its principals.

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