Starting for the 2017 tax year, TpT will be issuing 1099-K forms using cash basis reporting. This is a departure from earlier years in which we reported gross sales for your 1099-K on an accrual basis.
Cash and accrual basis reporting are accounting lingo for the timing that activity is counted or recorded. Using cash basis, activity is recorded and counted based on when the taxpayer (in this case the Teacher-Author) actually feels the effect of the activity. That would be when funds enter or leave your account like when we send your payout. On the other hand, under accrual basis, activity is recorded in real time as funds become owed to you or due to someone else. This can also be thought of as accounts receivable and accounts payable or when the actual sale occurs on TpT.
Let’s look at this with an example of a $5 sale made on October 5th from your TpT store. Under accrual basis, that $5 sale would be counted towards your sales and earnings in real time on October 5th. However, you won’t receive your earnings from that sale until you receive your October payout in November. So, cash basis reporting recognizes this lag and counts the $5 sale in November when you receive those funds in your payout.
This is a change that was approved by our independent tax advisors, and something we think will be a positive change for TpT Teacher-Authors because many already view your TpT earnings and income this way and use cash basis reporting to file your taxes.
*Note: For tax year 2017 only, returning 1099-K recipients will see no sales reported for January 2017. This is intentional and does not mean you didn’t make sales. This is because that entry would reflect December sales, which for you, were already reported on your 2016 1099-K for December under the accrual reporting method. All of your earnings are being accounted for and this transition year is the only time you’ll see that blank box.