Why don't your clients' 1099-Ks match their books? They run on different calendars

Every January a client forwards two or three Forms 1099-K and asks why none of them matches the sales figure or the bank deposits. That is the expected result. Box 1a is gross by design, before refunds, fees and chargebacks. Less expected is that each form cuts off the year on a different date. The processors’ help pages each name their own, and some processors send no form at all. The fix is a short reconciliation, one processor at a time, before the return goes in. The rules below are for the tax year 2026 forms, due to your clients by February 1, 2027.

Box 1a is gross by design

The Instructions for Form 1099-K, revised December 2026, define the gross amount as the total of reportable transactions “without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, shipping amounts, or any other amounts.” The Treasury said in 2010, in T.D. 9496, that the figure “is not intended to be an exact match of the net, taxable, or even the gross income of a payee.”

The IRS still matches it against returns. In its underreporter program for corporate and trust returns, IRM 4.119.4, it says to “compare affected Amount Types to Form 1120, line 1a (Gross receipts or sales)” and that “Gross Payment Card transactions are not adjusted for any authorized returns or other allowances.” A difference is normal. An unexplained one is the problem.

Not every processor sends one

The IRS FAQ says “There is no threshold amount that must be met to receive a Form 1099-K due to payments received through a payment card transaction.” It continues, “There is a threshold for payments received through a TPSO,” a third party settlement organization, meaning a payment app or an online marketplace, which reports only above $20,000 and 200 transactions. PayPal calls itself a TPSO. Square, Stripe and Shopify Payments apply the same test to their accounts without saying which kind of filer they are. Square’s page, for example, says an account qualifies “in most states” at “More than $20,000 in gross sales from goods or services” and “More than 200 transactions.”

So a missing form is not evidence of no card revenue, and one client can get a form from one processor and none from another. Clover adds that a client who accepts several card types “may receive a Form 1099-K from each credit card company.”

Different calendars

Each processor’s help page names the date its form counts a sale on.

• Square says its figures are “calculated based on the transaction dates of your sales,” a date “based on a standardized time known as Coordinated Universal Time (UTC).”
• Shopify Payments says its form is “based on when transactions posted to your Shopify Payments account in the UTC timezone, not when the order was placed.”
• Stripe’s support article says it uses “the available_on date of the balance transaction associated with the payment,” a date that “represents the date the funds become available in the Stripe account.”
• Toast says “Form 1099-K reflects deposits, which usually occur one to three days after a sale.”
• Clover says the total is based on “the sum of your deposits for the tax year, from January 1 to December 31.”

An illustration, with invented figures. A Seattle restaurant runs its dining room on Toast and its online orders through Square. On December 31 the dining room takes $9,400 on cards. Toast deposits it in January, so the books carry it in the closing year and Toast’s form does not. That evening, online customers pay $1,200 through Square, all of it after 4 PM Pacific. Pacific time in December is eight hours behind UTC, so 4 PM on December 31 is already January 1 in UTC, and the $1,200 falls on next year’s Square form. The books show $10,600 of card sales on December 31. That year’s two forms show none of it, and next year’s carry it, just as this year’s forms carry last year’s late December sales.

What is inside differs

Sales tax is not one rule. Square says gross payment amounts generally include “Taxes and tips collected on card transactions.” Stripe’s total includes “Taxes,” “Shipping fees” and “Refunded charges.” Amazon’s Seller Central help says the amount the buyer paid “includes sales proceeds, sales tax, and gift-wrap and shipping charges.” The other processors’ pages do not say. Whether collected tax is gross receipts turns on whether it is imposed on the buyer or the seller, per the 2025 edition of Publication 334, and the same IRS manual lists “sales tax, fees, cash back” among items that reduce an underreported amount.

New for tax year 2026, box 1c shows “the total amount of cash tips included in box 1a” and box 1d a Treasury Tipped Occupation Code. Both are for tips, there is no overtime box, and the form’s payee instructions say cash tips include tips “received in cash or charged.” The IRS says tips “are not included in the employer’s gross receipts.” Notice 2025-62 reads the tip line as a TPSO duty, the instructions do not repeat that limit, and the IRS has not said whether a card processor serving a restaurant must fill box 1c, so do not assume it equals the tips paid out.

Debit card cash back is on the form, but the IRS says “Generally, you wouldn’t include cash back amounts as part of your gross receipts.” And the instructions say a card payment that would otherwise be reportable under section 6041 is reported under section 6050W instead, so an insurer paying a medical or dental practice by virtual card issues no 1099 for it, and the payment belongs on the processor’s 1099-K if the processor issues one.

A routine for every card-taking client

1. List every way the client took payments during the year, including processors that sent no form, and collect every form from each, since one processor can send several.
2. For each processor, pull the export that rebuilds its own form. Square names its Payment Methods report with reporting hours set to UTC. Stripe says the “Total Gross Volume” column of its “Export transaction log” reflects the form total, give or take rounding. Shopify Payments has a “1099-K Transactions” export, and PayPal a Reconciliation Report you request beside the form. Toast says to compare “the matching deposit window in your Sales Summary, not the sale-date window.”
3. Tie each export to box 1a, then month by month to boxes 5a to 5l, so a difference lands in a month, not a year.
4. Bridge gross to book revenue through refunds, chargebacks, processor fees, sales tax according to who it is imposed on, tips paid to staff but not service charges, and cash back.
5. Handle the year-end cutoff by each processor’s own date rule.
6. Keep the workpaper, and ask the issuer for a corrected form when the TIN is wrong or a form duplicates another, where the issuer will reissue one. The IRS page “What to do with Form 1099-K” says “Don’t contact the IRS. We can’t correct your Form 1099-K.”

Before the return, not after a notice

The IRS’s own paragraph to a corporation that cannot explain the difference says to “review the separate statement provided to you by your card processors, as applicable, along with your books and records.” Done before the return rather than after a notice, that gives every client a January without surprises, a gross receipts line you can explain, and a workpaper already on file if a notice comes.