Choose a calculation method

The Stripe 1099 tax reporting product allows platforms to select a calculation method, depending on the type of 1099 form they must file. While these calculation methods reflect the most common reporting scenarios, you can import CSV files and edit the amount on each 1099 form to better match the requirements.

Payments including fees

This payment calculation method includes all charges and transfers including any fees related to each transaction. Such fees might be:

• Stripe processing and foreign currency conversion fees
• Platform fees

For Form 1099-K, the IRS requires reporting gross reportable amounts without any adjustments. It’s the taxpayer’s responsibility to determine their taxable income by taking into account their business expenses and deductions.

Depending on your business, you may determine this payment calculation method is also appropriate for the amounts on their Forms 1099-MISC or 1099-NEC.

Example 1

On 31 December 2020, a customer buys flowers for 100 USD from an online flower shop. The flower shop is a connected account and the destination charge uses the platform’s API key. The charge authorisation and capture time are the same since partial authorisation wasn’t specified. The platform retains a 2 USD platform fee and a 3.20 USD Stripe fee nets directly out of the connected account’s charge.

On January 2, 2021, the issuing bank settles the money to Stripe. On January 7, 2021, a payout occurs from the connected account’s Stripe balance to their bank account, and includes the proceeds from this sale. With this method, the platform can report 100 USD on their 1099 form for 2021, and no amount for 2020.

Assume the same conditions, but a direct charge uses the connected account’s API key. With this method, the platform can report the same 100 USD on their 1099 form for 2021.

Example 2

Assume the same conditions as Example 1, but the connected account issues a refund the same day as the charge because they’re unable to fulfill the order. Ignore any potential Stripe fees for refunds.

With this method, the platform can report the same 100 USD on their 1099 form for 2021, and no amount for 2020.

Payments excluding fees

This payment calculation method includes all charges and transfers excluding any fees related to each transaction. Such fees might be:

• Stripe processing and foreign currency conversion fees
• Platform fees

This method is useful if the platform wants to remove their fee from the amount reported for the connected account.

For example, in the destination charge flow, the application fee is attributed to the connected account, but a platform might pass the application fee to the end customer to pay the platform. Those funds aren’t necessarily attributable or even known to the connected account. Although platforms acknowledge that gross amounts should be reported to their connected accounts on the Form 1099-K, they might think the gross amount to report should be payments excluding fees.

For Form 1099-K, the IRS requires reporting gross amounts for all reportable transactions, without any adjustments for refunds, fees, credits, cash equivalents, or discounts. Because platforms use Connect differently, we recommend working with a tax advisor to determine if this method is right for you based on the 1099 form you want to file.

Depending on your business, you may determine this payment calculation method is also appropriate for the amounts on their Forms 1099-MISC or 1099-NEC.

Example

On 31 December 2020, a customer buys flowers for 100 USD from an online flower shop. The flower shop is a connected account and the destination charge uses the platform’s API key. The destination charge specifies an amount of 100 USD and a transfer_data[amount] of 94.80 USD. The charge authorisation and capture time are the same since partial authorisation wasn’t specified. The platform retains a 2 USD platform fee and a 3.20 USD Stripe fee nets directly out of the connected account’s charge.

On January 2, 2021, the issuing bank settles the money to Stripe. On January 7, 2021, a payout occurs from the connected account’s Stripe balance to their bank account, and includes the proceeds from this sale. With this method, the platform can report 94.80 USD on their 1099 form for 2021, and no amount for 2020.

Assume the same conditions, but the destination charge specifies an amount of 100 USD and an application_fee_amount of 5.20 USD. The Stripe fee is deducted on the platform’s account from the 5.20 USD. With this method, the platform can report the same 94.80 USD on their 1099 form for 2021.

Assume the same conditions, but a direct charge uses the connected account’s API key. The direct charge specifies an amount of 100 USD and an application_fee_amount of 5.20 USD. With this method, the platform can report the same 94.80 USD on their 1099 form for 2021.

Payouts only

The payouts only method lets you report only the amount that was paid out to the connected account’s bank account, minus any payout reversals. The amount may also include payments that aren’t related to a specific charge transaction. This calculation method takes into consideration payouts and not charges.

Because platforms use Connect differently, we recommend working with a tax advisor to determine if this method is right for you based on the 1099 form you want to file.

Example

On 31 December 2020, a customer buys flowers for 100 USD from an online flower shop. The flower shop is a connected account and the destination charge uses the platform’s API key. The charge authorisation and capture time are the same since partial authorisation wasn’t specified. The platform retains a 2 USD platform fee and a 3.20 USD Stripe fee nets directly out of the connected account’s charge.

On January 2, 2021, the issuing bank settles the money to Stripe. On January 7, 2021, a payout of 94.80 USD occurs from the connected account’s Stripe balance to their bank account, and includes the proceeds from this sale. With this method, the platform can report 94.80 USD on their 1099 form for 2021, and no amount for 2020.

Assume the same conditions, but a direct charge uses the connected account’s API key. On 7 January 2021, a payout of 94.80 USD occurs from the connected account’s Stripe balance to their bank account, and includes the proceeds from this sale. With this method, the platform can report the same 94.80 USD on their 1099 form for 2021.

Additional calculation method topics

The following sections discuss calculation method topics that might be applicable to your platform.

Transactions included in calculations for the account

The inclusion of transactions in the Form 1099 calculations for the forms you will issue depends on the connected account’s controller.fees.payer property.

• Transactions on accounts where controller.fees.payer = application_custom or application_express are included in the calculations.
• Transactions on accounts where controller.fees.payer = application could be included if the application fees for those transactions are paid to the platform. Otherwise, the transactions could be included in a Stripe-issued 1099.
• Transactions on accounts where controller.fees.payer = account won’t be included, but instead could be included in a Stripe-issued 1099 to the account.

Timing and recognition of transactions

Stripe uses the available_on date of the balance transaction associated with the payment to determine which tax year the transaction belongs to. The available_on date represents the date the funds become available in the Stripe account. We believe this approach best matches the IRS’s instructions.

Card not present payments

IRS Form 1099-K box “1b” reports the volume of “card not present” payments. Stripe classifies a payment as “card present” or “card not present” based on the PaymentMethod type associated with that payment. The following PaymentMethod type values are “card present”. All others are “card not present”:

1. card_present
2. interac_present

Tax form totals

We recommend that platforms audit Stripe transactions that have contributed to a form’s totals by exporting the transaction log.

Account transactions performed outside of Stripe aren’t included in form totals. To include non-Stripe transactions, platforms must manually adjust the form box amounts before filing.

Transactions created with the Transfers API to credit connected accounts (for example, handling dispute reversals and refund failures) are included in 1099-K form totals. Debits from connected accounts are excluded. To remove these credit transfers from the form, platforms must manually adjust the form box amounts before filing.

Separate charges and transfers

Stripe derives the reportable amount for a separate charge and transfer from the transfer, not the charge.

Additionally, you must use the source_transaction parameter to associate a charge with a transfer from your platform to a connected account – Stripe classifies any transfers without this parameter as “card not present” transactions.

If you initially created a separate charge and transfer with a link from the transfer to the charge and later updated the Charge object to include the transfer, we treat it like a destination charge in calculations. The gross amount on your draft form might change if you’ve opted to include fees, as we’ll now include the charge in our considerations.

Foreign exchange rate conversions

Stripe’s 1099 calculation methods convert non-USD transactions to USD using the market exchange rate from the day the transaction is created. This method might yield a different value than the Stripe Dashboard shows because we compute that value using an intra-day exchange rate adjusted for Stripe’s foreign exchange fee.

Cancelled asynchronous payments

If a user cancels an asynchronous payment (for example, ACH debit) that would’ve otherwise been successful before the payment completes, that payment might still be included in the results of the “payments including fees” and “payments excluding fees” methods.

Export transaction logs

For tax year 2022 and later, you can use the Stripe Dashboard to export the transaction log of each 1099 form. A transaction log lists the Stripe transactions that have contributed to a form’s total. This log allows you to audit transaction discrepancies and answer questions from your connected accounts about which transactions Stripe includes in their tax forms.

After you export the transaction log, the sum of its Calculation Amount column reflects the form total that you see on the 1099. For each transaction, we show the applicable merchant_id, balance_transaction_id, charge_id, and transfer_id along with the calculation amount relevant to that transaction. The calculation amount is dependent on the type of calculation method you choose. The 1099-K form transaction logs list card_not_present_volume and transaction_count to match the values on the form.

To export the transaction log of a tax form:

1. Navigate to the Tax reporting page in the Dashboard.
2. Select the tickbox next to the tax form.
3. Click the overflow menu () at the top-right of the tax form and select Export transaction log.
4. Specify the date range and rows that you want to export. Use the default export settings to capture all the details of the entire year. The transaction log file downloads in your browser. Keep the email notification option selected if you want to receive an email containing a link to download your transaction log.

The transaction log file downloads after Stripe finishes the export process. If you exported with the email notification option selected, Stripe also sends you an email from notification@stripe.com with a link to download your transaction log.