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1099K, Tax, and Client Billing

I’m very confused by the 1099K I received from Webflow.
The document shows an amount that makes it seem like I received this income from Webflow. But I did not. I only make a profit on TWO of the sites I host. All the rest of the money goes to Webflow, not me. So can some explain why in the (insert expletive) I should have this on my 1099K? I would have expected only the PROFIT from any hosting set-up with profit.

I have no way to deduct the hosting as an expense, since again, I’M NOT PAYING IT.

This is really insane and upsetting to me and I hope someone responds ASAP.

2 Likes

Please contact support@webflow.com about this issue, there’s even a chat option in the hosting tab of your project.

I have the same issue, @Tryit. I believe the amount on my 1099-K should be only the amount I received in profit from client billing. Here’s the reply I got when I questioned Support:

Hello Jon,

I just wanted to follow up with some additional information regarding the 1099-K.

Webflow has a legal requirement to send 1099-K tax forms for Client Billing accounts that are set up for any payments that are received from clients, regardless of the profit amount payouts you received during the year.

For more information on understanding the 1099-K form, see here: https://www.irs.gov/businesses/understanding-your-1099-k

The 1099k is normally reporting the total amount for payments paid by your clients for the hosting fees that Webflow processes on your behalf, it does not indicate what the total profit paid out to your bank account is.

In general, you would report the amount in 1099-K form, which are payments to Webflow and then reconciles those payments with the client billing profits received during the year.

Webflow cannot provide tax advice, I would suggest contacting a tax professional in case of questions about how to use a 1099-K with your tax reporting requirements.

Please let me know if this is helpful or if you have any additional questions.

All the best,
Cecilia

If anyone has consulted a tax professional about this issue, please post here so we can know if Webflow needs to issue revised 1099-K’s.

Thanks all

2 Likes

Same issue here… Seems like a shady business practice to me. I’ve been operating my business for 10+ years and have never been 1099 like this before from any of my other vendors or hosting services… I just emailed the contact listed on the 1099… I’ll update here once I get a response. I’m going to contact my accountant as well and see what he has to say about this. @jonreese

1 Like

I got another reply from Webflow support with further clarification this morning:

——

Hello Jon!

Thanks for reaching out, and I’m happy to help clarify!

I can see there’s some confusion about your 1099-K, and I’m more than willing to clear things up for you.

The IRS requires credit card payments to be reported on the 1099-K form, however this form does not imply that any amount was paid directly to you. From the IRS:

  • The Form 1099-K, Payment Card and Third Party Network Transactions, is an information return that reports the gross amount of reportable transactions for the calendar year to the IRS.
  • The “gross amount” of reportable transactions means the total unadjusted dollar amount of aggregate payment transactions for each participating payee.

https://www.irs.gov/payments/general-faqs-on-new-payment-card-reporting-requirements

In short: the amount on your 1099-K is not interpreted by Webflow or the IRS as your earned revenue.

You can think of it as a list of card transactions for your clients. Any amounts paid directly to Webflow [including fees] is usually filed during taxes as an expense, which should relieve you of any tax burden for money you did not receive. Here’s a more clear example of how 1099-Ks could be used to report taxes.

Example

Julie has one client, Johan. Johan purchases the Annual CMS Site Plan for $192 in January of 2019, using our Client Billing feature. Julie receives a 1099-K showing $192 for January, although she never set a profit amount for the website and received no funds. When Julie files her taxes, she reports the $192 charged to Johan’s card and uses her Webflow invoices to show the payments were sent to Webflow as a business expense.

I’ve created a visual representation here:

https://share.getcloudapp.com/2NurnXjW

Because your 1099-K shows the amount your clients paid via credit/debit card, your Webflow invoices will show where the money went (to Webflow). You can view these directly from each project’s Billing Settings – for example:

https://webflow.com/dashboard/sites/milestonegp/billing

The IRS requires this system of reporting as a way to “follow the money” – from the client’s original payment to the final destination at Webflow [minus profit that is paid out to you]. The 1099-K is not interpreted as money you necessarily owe taxes on, but rather the amount your clients paid via their cards. Any amount that was not paid directly to you can be claimed as a business expense. I hope this helps, and although Webflow cannot provide tax advice, I would recommend reaching out to a tax professional in case of questions about how to use a 1099-K with your tax reporting requirements.

Please let me know if you have other questions – I’m always happy to help!

My Best,

Andrew

CC @Tryit @itsmeblake @aaronocampo

4 Likes

Hi @itsmeblake, it is not a shady business practice, it is just the way 1099-k forms work.

The 1099-K is required to report the total amount of gross payments made by your clients before Webflow fees were extracted.

Using Kickstarter as an example, the amount reported on each 1099-K includes the fees that Kickstarter takes out before the funds reach the bank account.

When reporting gross payments over $600, Webflow recommends contacting a tax professional to find out what your exact reporting requirements are.

1 Like

I feel I am in the same boat as many have posted above in need of clarity.

I get the process shown above. The question I am facing is where is the documentation of the expenses for a client billing account? I can’t seem to find it. I see a 1099k(proof of transaction of X amount) to my business. I can also see the invoice to the client(for X amount)virtually the same thing as the 1099k. But nothing to prove that an expense was paid to webflow.

Where can I find that, as this example shows?

Example

Julie has one client, Johan. Johan purchases the Annual CMS Site Plan for $192 in January of 2019, using our Client Billing feature. Julie receives a 1099-K showing $192 for January, although she never set a profit amount for the website and received no funds. When Julie files her taxes, she reports the $192 charged to Johan’s card and uses her Webflow invoices to show the payments were sent to Webflow as a business expense.

I just got my 1099 and i have to agree this is Shady as hell, I tried contacting the number that is supplied and it doesn’t even ring, it just seas it’s voice mail is not set up. So you can’t even leave a message.WebFlow was not upfront about this, I would of set up my clients differently if I would of known about this. I mean who the hell whants to get 1099’d for such a small profit, I thought you had to exceed $600 to get 1099’d

All I want to know is what do I have to do so I am not involved in the transaction? and I stop getting 1099’d?

Same here. If we are required to go through and report every expense from the 1099, those should all be in one place. With a lot of clients, this gets complicated… :confused:

1 Like

@cyberdave — I agree with @trentphoto, surely there’s a place to find all expenses we need to report without having to go through every project? I have hundreds of projects in my account!

I agree with everyone’s pain. I was able to go into all my 2019 bank statements (pdfs…more pain!) and figure out how much Webflow paid me and subtracted those amounts on each month from the 1099-k. I don’t know WTF to do other than report all this as income and then use whatever the client paid above as an expense. This is thin ice for me. I don’t use an accountant, I do online banking like most of us might do.

I somewhat get why Webflow has to report this way but if in the billing tools, there could be an easier way to sort this out, it would be useful.

Unfortunately, client billing profit which I loved before is now seeming like a liability.

I used client billing once last year (without any profit markup) and I feel as if I may have eaten the taxes on that–so to speak. I’d love to use this feature because it sounds great in theory but it seems as if the complexity in tax reporting makes it more difficult than convenient.

I’d love to hear if this has any updates from the Webflow team about easier reporting flow in terms of accessing the invoices and reconciling the profits/expenses.