IRS Reporting Requirements
Your merchant account will soon be impacted by new IRS merchant transactions reporting requirements. Global Processing Systems can assist you with these new regulations. The new transaction reporting requirements require “merchant acquiring entities” to report the gross amount of their merchant customers’ payment card transactions to the IRS. Many processors will bill you for this service while we will do this free of charge. To learn more about the new rules and law please read below:
The federal Housing Assistance Tax Act of 2008 included the enactment of new Section 6050W of the Internal Revenue Code that requires reporting entities to annually report payments in settlement of payment card and third party network transactions to the IRS for all merchants. Reporting entities will be required to file an annual information return with the IRS and provide each merchant with a corresponding Form 1099-K, reporting monthly and annual gross sales. The first such information return and Form 1099-K will be due in January, 2012 for 2011 calendar year transaction activity.
Section 6050W also requires reporting entities to perform backup withholding from merchant funding by deducting and withholding Federal income tax, (Federal withholding is currently 28%) from the gross sales amount of reportable transactions if (a) the merchant fails to provide the merchant’s TIN to the reporting entity (withholding begins January 1, 2012), or (b) the IRS notifies the reporting entity that the TIN (when matched with the name) is incorrect (withholding begins after notification from the IRS). Merchants subject to Federal income tax backup withholding may also be subject to backup withholding for specific states as applicable. To avoid backup withholding, it is very important that merchants provide the correct name and TIN that is used when filing their tax return that includes the transactions for their business.
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