If you made any payments to contractors by credit card, debit card, gift card, or a third-party network like PayPal, the IRS requires you to exclude those amounts from your 1099-MISC forms.
Instead, they require the payment settlement companies to report those amounts.
For more information about the payments that you shouldn't report, review the IRS instructions for Form 1099-K. Small businesses don't file form 1099-K. It is for payment settlement companies, such as banks, to file.
What if Form 1099-MISC shows a different amount than what I expected?
If the Verify 1099 Forms page shows the total annual amount you paid a contractor (including the amounts paid by credit card, debit card, gift card, or PayPal), do the following:
- If you paid the contractor using only a credit card, debit card, gift card, or PayPal: Don't use our 1099 E-file service to e-file Form 1099-MISC for the contractor. Instead, edit the contractor and on the Edit 1099 page, click the Delete button. This deletes the payment from only your list of 1099-MISC e-filings, not from your payroll records.
- If you paid the contractor using two forms of payment, one being either cash or check and the other credit card, debit card, gift card, or PayPal: Delete the original payment in your Payroll product, re-enter the payment using the amount you paid by cash or check, then e-file a Form 1099-MISC for that amount. In other words, Form 1099-MISC should not include the portion of what you paid the contractor by credit card, debit card, gift card, or PayPal.
Accessing the Verify 1099 Forms page
Note: The Verify 1099 Forms page is available during the annual tax season only, typically from Jan 1 to Apr 30.
- Go to Taxes & Forms.
- Select 1099.
- Select the Enter information link.