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.
Stripe recommends that you consult a tax advisor to determine your tax filing and reporting requirements.
| Available calculation method | 1099-K | 1099-MISC | 1099-NEC |
|---|---|---|---|
| Payments including fees | Yes | Yes | Yes |
| Payments excluding fees | Yes | Yes | Yes |
| Payouts only | Yes | Yes |
Payments including fees
This payment calculation method includes all charges related to a transaction, including:
- Stripe processing and conversion fees
- Platform fees
- Shipping fees
- Taxes
- Refunded charges
- All adjustments
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 December 31, 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 authorization and capture time are the same since partial authorization 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.
| Description | Amount |
|---|---|
| Customer charged | 100 USD |
| Increase in connected account’s Stripe balance | 94.80 USD |
| Increase in platform account’s Stripe balance | 2 USD |
| Amount reported with this method | 100 USD |
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.
| Description | Amount |
|---|---|
| Customer charged | 100 USD |
| Customer refunded | 100 USD |
| Net change in connected account’s Stripe balance | 0 USD |
| Net change in platform account’s Stripe balance | 0 USD |
| Amount reported with this method | 100 USD |
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, but excludes the application fee that a platform collects on the charge and the Stripe fee. This method is useful if the platform wants to remove their fee from 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. While 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 December 31, 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 authorization and capture time are the same since partial authorization 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.
| Description | Amount |
|---|---|
| Customer charged | 100 USD |
| Increase in connected account’s Stripe balance | 94.80 USD |
| Increase in platform account’s Stripe balance | 2 USD |
| Amount reported with this method | 94.80 USD |
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 December 31, 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 authorization and capture time are the same since partial authorization 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.
| Description | Amount |
|---|---|
| Customer charged | 100 USD |
| Increase in connected account’s Stripe balance | 94.80 USD |
| Increase in platform account’s Stripe balance | 2 USD |
| Amount reported with this method (2020) | 0 USD |
| Amount reported with this method (2021) | 94.80 USD |
Assume the same conditions, but a direct charge uses the connected account’s API key. 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 the same 94.80 USD on their 1099 form for 2021.