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 PayPalDon'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 PayPalDelete 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.

  1. Go to Taxes & Forms.
  2. Select 1099.
  3. Select the Enter information link.