When rewarding Advocates through our Dashboard, it is classified as a digital payment through XTRM.
Using Advocator Pay powered by XTRM, your referral rewards are classified as digital payments. Traditionally, third-party settlement organizations like Paypal have used this form to report payment transactions. Third-party settlement organizations are required to issue a 1099-K after paying out over $600.00.
The form 1099-K was introduced into law in 2008 and went into effect until 2011- it’s by far the youngest of the 15 different types of 1099 forms. XTRM provides this tax document pre-filled online to all payment recipients (advocates) when they the required threshold.
As with many IRS forms, compiling and filing 1099-Ks is more complex than it sounds: the good new is XTRM automatically fills it out for you. Here is an overview.
What is a 1099-K form?
The 1099-K is used to report payments processed by payment settlement entities (PSEs). A PSE comes in two forms, either a third-party settlement organization also referred to as a TPSO or merchant acquiring entity, MAE, (like banks). A third-party payment network is also a type of entity responsible for issuing form 1099-K. When using a 1099-K for information reporting, you must issue a copy to the payment recipient and file with the IRS.