The Housing and Economic Recovery Act of 2008 created a reporting requirement for banks and other payment settlement entities to report payment card and third-party network transactions for their participating merchants to the IRS. This reporting requirement is also known as Internal Revenue Code (IRC) Section 6050W (please refer to the IRS website for more information: www.IRS.gov).
The law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants. The final regulations contain rules to implement reporting of credit card, debit card and similar transactions, as well as transactions settled through third-party payment networks, such as third-party organizations that settle online transactions.
Beginning in 2012 every payment processor filed 1099K forms with the IRS reporting the gross amount of each merchant’s card transactions for the 2011 year, as well as providing a corresponding statement to merchants.
Reporting entities are also required to collect and verify the tax identification number (TIN) along with the merchant’s legal name and address associated with the TIN number. If a merchant fails to provide its TIN or correct legal name or there is a discrepancy between the information the merchant provided to the reporting entity and the IRS’ records, the IRS requires the reporting entity to begin backup withholding of the merchant‘s future settlements amounts.
Visit the IRS website at www.IRS.gov for detailed information. Then look to your payment processor for Form 1099-K Assistance. We’re here to help.
The information contained in this summary is based on information available at the time of publication, which is subject to change. This information is provided as a convenience and is not intended to be or construed as legal advice. Because of the generality of this communication, the information provided herein may not be applicable in all situations, is not a comprehensive list of issues that could impact your business and should not be relied upon without specific legal advice from your legal, compliance and/or other subject matter expert. Your payment processor makes no representations or warranties as to the accuracy or completeness of this information and all such information is provided as a convenience only.
The IRS requires banks and other payment settlement entities to file the first report for merchants' gross receipts in 2012 for the 2011 transactions and then every calendar year thereafter. A Form 1099-K containing the gross receipts data will be mailed to merchants by January 31st of the year following the year for which the return is required.