Is gross income reported on 1099s calculated before or after discount codes are applied?

[AdorkaBows]

When I have special events sometimes I run a coupon or discount for the event. 

Say I have a $100 item and someone gets $10 off the order with a coupon.

Will my 1099 reflect a gross sale of $100 or $90? 
This makes a difference for my bookkeeping re: what my taxable income will be. 

If anyone knows, thanks! 

[Goldneye · Accepted solution]

HI, hopefully these Square Support pages will help.

https://squareup.com/help/us/en/article/5048-1099-k-overview

https://squareup.com/help/us/en/article/6115-1099-k-tax-reporting-information

A few states are different so included both Support Pages here.

[AdorkaBows]

Thanks! Yes, I read through those but I don't see anything that answers this specific question. Am I missing it? 

[Goldneye]

HI, after a quick Google search I found this

[AdorkaBows]

Thank you! That is also helpful to know and while not technically the same thing, it might give some insight. I would assume that Square would only count my gross income as the actual money the person paid which is after the discount is applied, I just wanted to be sure 😄 

[MCF]

ATTENTION SQUARE STAFF:

Someone from Square's accounting dept should answer the actual question here, it is of great interest come tax time (and when doing things like using one's own 100% discount code to test checkout functionality).

[_Violet]

Hi @MCF - Thanks for reaching out to us with your question. I see this is your first post in the Seller Community so I'd like to officially welcome you! 🎉👏

I'm happy to help but will need some more detail in order to better understand your question. Are you also asking, "Is gross income reported on 1099s calculated before or after discount codes are applied?", as in the title of this thread?

If so, under IRS rules, we are required to report in Box 1a of Form 1099-K the gross amount of the total reportable payment card transactions processed for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions without regard to any adjustments, including credits, discount amounts, fees, refunded amounts, tips, or any other amounts.

Whenever you have a moment, please reply to this message with a little more information describing your question. I’ll be sure to follow up as soon as possible.

[MCF]

That's still a little bit unclear.

If a customer checks out a $50 basket and uses a 100% discount code, they do not have to put in any card info, and there is no credit card transaction. But there is a transaction on the Square logs of +$50 (sale) and -$50 (discount).

Are you saying that in that case the $50 imaginary gross is added to the total of reportable transactions?

If that IS what you're saying, please, if you're able, set your documentation aside and discuss it with someone in the accounting group who is actually hands-on with this implementation, then let us know whether it is really true. Common sense and all tax-legal accounting procedures that I'm aware of would point to the opposite.

[_Violet]

Hi there @MCF - Apologies for the confusion here. A transaction or item with a 100% discount would not be calculated into your 1099-K but any discounts less than 100% will be factored in.

I hope this information is helpful but please do let me know if you have any additional questions.