1099-K Form Assistance

According to the IRS, this provision is designed to improve voluntary tax compliance by business taxpayers and assist the IRS in determining the tax returns are correct and accurate.

As a merchant, you must ensure that your payment processor has the correct TIN and legal name on file. Accurate tax information matching your IRS tax records will help to prevent future IRS backup withholding on payment card and third-party network transaction “gross amount” receipts.

Yes, all merchants must comply with these requirements.

Professionals in the payment industry requested that the IRS set a de minimus threshold, (more than 200 transactions aggregating more than $20,000 per calendar year for a given payee), for all payment card transactions in order to be required for reporting. Final IRS regulations did not adopt this recommendation for merchant acquiring entities or banks.

(Business owners are encouraged to discuss with their individual tax professional.)

The new IRS requirements were made available throughout the payment processing industry and through various IRS publications. Taxpayers can find additional information on the IRS’ website at www.irs.gov or by consulting with their tax professional.

For Individuals or Sole Proprietors, the Legal Name is usually the business owner’s name as shown on income tax returns, with the Social Security Administration, and/or on the business owner’s Social Security card. 

For all other Business Types, the Legal Name is the Business name the merchant provided to the IRS filed on Form SS-4. Business owners that are still unsure of the correct Business Legal Name or Tax Identification Number on file may contact the IRS and request Form 147C, which will confirm the taxpayer information recorded with the IRS.

In accordance with IRS guidelines, if the payment processor does not have a merchant's correct Federal Tax Identification Number and Legal Name (as reported to the IRS), the merchant is subject to backup withholding from any future payments made. The current federal withholding amount is 28%.

If we do not have your correct information, then an incorrect 1099-K will be filed with the IRS. Eventually, the IRS will require that all merchants with invalid tax records be subject to IRS mandated backup tax withholding. The current federal backup withholding amount is 28%, and we will be required to withhold such amount from your settlements and remit directly to the IRS beginning in 2013. We understand the impact that withholding funds can have on a business and want to help you avoid that IRS requirement.

The IRS requires that we report the gross amount. The gross amount is defined as the total dollar amount of aggregated transactions in which a payment card is accepted and processed as payment for each merchant. This gross amount is not adjusted for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.