IRS reporting FAQ
A Federal Tax Identification Number (TIN) is an identification number used by the IRS in the administration of tax laws. In most cases the TIN is either a Social Security Number (SSN) or Employer Identification Number (EIN), also known as a federal tax identification number.
For-purposes of complying with the new law, a merchant’s “legal name” is typically the name the merchant uses to file its federal tax returns, or the legal name the merchant provided to the IRS filed on Form SS-4. This should match what is on file with your payment processor.
“A payment card” generally means a credit card, debit card, transit card, governmental-issued electronic benefit transaction (EBT) card, or any other card which is accepted as payment by a network of persons unrelated to the issuer of the card and to the other merchants who accept the card as payment.
Under proposed regulations, “gross amount” is defined as the total dollar amount-of aggregated transactions in which a payment card is accepted as payment for each merchant without regard to any adjustments for credits, cash equivalents, discount amounts, fees refunded amounts, or any other amounts. This is for communication purposes only and is not intended to provide any legal or tax advice. Please visit the IRS Website at www.IRS.Gov for additional information on the 6050W requirements.
A “merchant acquiring entity” is defined as the bank or other organization contractually obligated to make payment to merchants in settlement of payment card transactions.
A “payment settlement entity” is, in the case of a payment card transaction, a merchant acquiring entity; or, in the case of a third-party network transaction, the third party settlement organization.
As your payment processor, we will report your gross receipts for all electronic payment transactions to the IRS. A Form 1099-K will be provided to you on or before January 31st of the year following the year for which the return is required.
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 possible IRS backup withholding.
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 consultant regarding rules and explanations related to their tax status.)
The new IRS requirements were made available throughout the payment processing industry and through various IRS publications. Taxpayers may find additional information on the IRS’ website at www.IRS.Gov or by consulting with their tax professional.
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 may be subject to backup withholding of a minimum of 28% from any future payments made, adhering to IRS guidelines. This is for communication purposes only and is not intended to provide any legal or tax advice. Please visit the IRS Website at www.IRS.Gov for additional information on the 6050W requirements.
No, the IRS requires that backup withholding is directly transmitted to the IRS.
If you receive notification from your merchant processor that your information needs to be updated, please visit https://npc.my1099k.com to provide corrected data as soon as possible. For any other questions or changes merchants may contact the number on their merchant processing statement.
Under the proposed rules, acquirers are not required to split or differentiate the reporting. Payment processors are required to report the total volume paid to US legal entities.
Under the IRS regulations, if a merchant is a franchise of a larger organization but not owned by that larger organization, then the franchise’s “reportable payment transactions” would be reported to the IRS at the ownership level and would be separate from the larger organization. However, if the merchant location is owned by a larger organization this merchant’s “reportable payment transactions” would be included in the totals for the larger organization.
Merchants with non-matching IRS information will continue to receive communication along with the necessary actions to take in order to prevent backup withholding in 2012.