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Form 1099-K–How to Reconcile with QuickBooks

Form 1099-K–How to Reconcile with QuickBooks

Doug Sleeter | February 10, 2012 | 0 Comments More


Well, the January 31 deadline has come and gone, so by now you should have your 1099-K forms in hand. This new form is being sent by all “merchant acquiring entities” as mandated by Section 6050W of the U.S. Internal Revenue Code. That means that eBay, PayPal,  as well as the credit card processing companies must send FORM 1099-k to the merchant (i.e. the business that accepts credit card transactions), and a copy of the form must be sent to the US Government.

When you receive the forms, verify that the legal name and Taxpayer Identification Number (TIN) reported on the form is correct. This is extremely important because if it does not match, that means that your merchant processor has the wrong TIN for your account with them, and it may cause your business to be subject to a 28% US Federal Income Tax withholding on the gross payments in the future.

The first time you see this form, you’ll likely react by asking yourself, “did I really get paid that much via credit card?” But if you check your credit card fees expense account you’ll probably say, “Yes, I guess I did.”

Then the next logical question is, “How do I know if the amount on this form is correct?” Fortunately, QuickBooks can help. I asked Bonnie Nagayama, CPA and Chief Sleeter Group QuickBooks Consultant to look into it and she suggests this methodology for reconciling the 1099-K forms with your QuickBooks records.

This reconciliation process is really pretty easy assuming you have sales receipts and receive payment transactions that all go through undeposited funds, and assuming that you were consistent about entering the payment method as part of those transactions.

Step 1: Start with the Transaction Detail Report (Reports > Accountant & Taxes > Transaction Detail by Account Report)

Step 2: Modify the report by clicking on the Customize Report button

a) Change the Date to Last Year

b) Change the Total by to Month

c) Add the Payment Method column to the report

d) Filter the Account for Undeposited Funds

e) Filter for Payment method. Select the method corresponding to the 1099-K you are reconciling. For example, is it from Paypal, American Express, or should it include multiple payment types such as Visa and MasterCard together?

f) Filter for multiple transaction types Sales Receipt and Payment. If you are processing credit cards through QuickBooks using Intuit Payment Solutions, also include CCard Refunds to make the reconciliation process easier.

Step 3: The resulting report will contain all of the transactions for the payment methods and transaction type you selected.

It might be easier to read if you export the report to an Excel spreadsheet and ask QuickBooks to do “auto outlining” of the exported report. You can find that under the advanced

Using this report, review the 1099-K for the total amount in Box 1. Box 5a-5l show the total amount by month. If the total does not agree, you can work on reconciling the amounts by the month instead. Note that in some 1099-k reports, the reported amount is gross receipts without regard to any credits, chargebacks, fees, cash equivalents, discounts, refunds, or any other amounts. Also, the amounts reported may differ from your monthly totals because of a difference between the transaction date per the credit card company compared with the QuickBooks transaction date. There is no need to worry if the amounts differ slightly by month. The yearly total is what you should make sure is right, or very close.

By the way, has a compelling online accounting solution that helps eBay merchants track their finances, and they have a solution for reconciling Form 1099-K.

One final note on this. For 2011, the corporate tax return (Form 1065) does NOT require the business to report 1099-k information separately on the return. So that means your gross receipts per your books is what will be reported, just like it always has been. Evidently, the IRS wants to give the 1099-k reporters another year to work out the bugs and implement accurate 1099-k reporting systems.

Bonnie Nagayama, CPA and Chief Sleeter Group QuickBooks Consultant and Laura Messerschmitt (@ljmesser) of contributed to this post.




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