How to Reconcile your 1099-K to your QuickBooks Data

Hi Ruth-

We received our 1099K from the QuickBooks Merchant Providers (Innovative Merchant Solutions LLC). We also see on our corporate return (IRS Form 1120) that starting next year we will need to enter the amount of funds we received from the merchant provider per the 1099K, then also enter the amount received through non-merchant transactions. Since we are on an accrual basis, have a huge amount of accounts receivable per month and also deal with sales tax, going from our bottom line on our P and L to calculating the amount received through non-merchant transactions and the amount on the 1099K will be an astronomical task. The IRS’ definition of Gross Sales will also make this task difficult. We will be required to add back in each return. This will have to be done with a review of each days receipts. Fortunately we have not done summary entries into QuickBooks financial and have all the detail there. Is QuickBooks working on a solution for this? Especially since we have QuickBooks POS, QuickBooks Financial and QuickBooks Merchant Services, we are hoping there is a work around or a report that calculates this in our future. Fortunately it is not required this year or we would be scrambling to reconcile things. Given our volume of transactions, we cannot wait until the end of next January, when we receive our 1099K, to reconcile this amount and have our information to the CPA by mid February, in order for them to do our return by 3/15. We will probably tackle this as each merchant statement posts, but this is still a HUGE task. Please review form 1120 and the instructions as needed. Having a work around available would be a HUGE incentive to going 100% QuickBooks (Financial, POS and Merchant Services). A big selling point I would think. Since you are so well connected with QuickBooks I thought I’d start by asking you.

Trying not to panic…

You can change the reporting basis on your reports to cash by selecting Customize Report and then select Cash. Even better, you can also create a custom transaction detail report, filter for Sales Receipts and Payments, add a Payment Method column, and then Total by Payment Method. That should give you what you’re looking for.

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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

Ruth is the an Intuit Premier Reseller that offers great deals on QuickBooks POS and QuickBooks Enterprise. She has provided expert QuickBooks help to thousands of businesses all over the world since 1996.

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2 Responses to How to Reconcile your 1099-K to your QuickBooks Data

  • Follow-up question…I’m somewhat confused with this new 1099-K reporting. My client too has outstanding receivables. I record the credit card payments received against the A/R and separate/deduct the fees like a payment to the card payment organization. In others words, I record the credit card payment as gross income and make a separate payment for the fees. Is the income received from the credit card payments to be shown in a separate income account on the P&L to match to the 1099-K? Or maybe, I am just really lost.

    • It looks like the IRS is dropping the requirement to reconcile 1099-K. The IRS recently sent a letter to Susan Eckerly, senior vice president of public policy at the National Federation of Independent Business, IRS deputy commissioner for services and enforcement Steven T. Miller, wrote:

      “Thank you for your January 18, 2012, letter concerning proposals that Forms 1120 and other business income tax forms require a reconciliation of gross receipts and merchant card transactions,” he wrote. “As you know, we announced in October that no reconciliation is required on the 2011 income tax returns. In your letter, you raised whether we would require reconciliation for future years and outlined potential business impacts if we pursued such reconciliation.

      “This is to confirm what I stated in our recent meeting with your organization and other industry representatives,” Miller added. “There will be no reconciliation required on the 2012 form, nor do we intend to require reconciliation in future years. Our intention is that the reporting of gross receipts and sales on the 2012 income tax forms will be modeled on the 2010 income tax forms. No other changes to these forms related to payment card reporting are contemplated.”