Are credit card sales, reported on 1099-K, from my own credit card taxable?

[Viking99]

If I have a merchant account for credit card processing, they will report credit card transactions on a 1099-K.

If an authorized user on my own credit card makes a transaction with my credit card terminal, my credit card is charged and the money is deposited in my own bank account (after fees).

For example, the authorized user charges $100.00 using my credit card, and the credit card processor then deposits $99.00 to my bank account. Subsequently, I will have to pay back the $100.00 to my own credit card account.

This transaction will then be reported on my 1099-K by the credit card processor.

Am I liable for any taxes for this? It is just my own money that is taking a “round-trip”.

[DianeC958]

It is best for you to report the amount that is shown on the 1099-K on your tax return.  If you report an amount that is less than the amount on the 1099-K, you are more likely to receive a letter from the IRS that you did not report your income in full.  They will add an additional tax amount due to the additional income.

To not have this count as income you would need to take a business deduction for the amount you charged yourself, with a receipt for the transaction and what goods or services you received for the amount.

[Viking99]

Thank you for your response (I didn't know that you had responded - I didn't get an E-mail...).

I think that you are saying that I need to file a schedule C (as sole prop) even though I don't have any business income/expenses?

There are multiple transactions; I am not sure if I have receipts. I can show the charges from my own credit card, and deposits to my own bank account. Do I submit those with my tax return??

There were no goods or services rendered in connection with the charges.

[Viking99]

I forgot to add; Maybe I could add the 1099-K as other income instead of filing schedule C. I would then add a negative "other income" entry to net out the 1099-K to zero.

[MaryK4]

This is one area the IRS will definitely need to clarify- the 1099-K is issued for electronic payments so Cryptocurrency has been reported on 1099-K which requires a Schedule D not C.  Also, since some of the state are requiring issue of the 1099-K for amounts as low as $600 (Mass and Vermont), many people with casual sales are getting them without the need of filing any tax forms.  I think you would be okay to report as other income- just be sure to list 1099-K as the description.  

@Viking99

[Viking99]

Bottom line is that it should not be classified a s taxable income.

However, I have a follow up question to this situation:

Normally credit card rewards (e.g. frequent flyer miles, cash-back etc) are tax exempt. However, if my credit card fees are lower than my reward, I will make a net gain on the "round trip".  Would this somehow make my rewards taxable?

[MaryK4]

This would be in the same category as the rewards for tax purposes.

@Viking99