The Internal Revenue Service (IRS) requires entities called “third-party settlement organizations” to report on certain payments transacted over a calendar year through their networks. At the beginning of each year, Dwolla sends a Form 1099-K to each user in our system that receives more than 200 payments that total more than $20,000 during the previous calendar year.
For users identified in our system as being a resident in Vermont or Massachusetts, Dwolla will send a Form 1099-K to each user who receives more than $600 in gross payments in a calendar year, in accordance with the rules of those states.
Both the federal and state Form 1099-Ks are provided to the IRS to report certain payments that are sent or received from third-party settlement organizations. This form should be used in conjunction with other tax records (bank statements, invoices, etc.) to report taxable income, if any. Please consult your tax advisor to determine your tax reporting requirements.
If you have received a Form 1099-K, it is based on your activity with one or more of Dwolla’s customers that uses the Dwolla Platform to process their payments.
This blog post has more information on a Form 1099-K.