reporting to the IRS
The Internal Revenue Service (IRS) issued final regulations requiring that, starting with transactions in calendar year 2011, the gross amount of payment card and third-party network transactions be reported annually to participating merchants and the IRS. The Housing and Economic Recovery Act of 2008 created a new reporting requirement for members of the electronic payments industry. The new law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants. These 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 January 2012, every payment processor will file a 1099-K form with the IRS reporting the gross amount of each merchant’s card transactions for the 2011 year, as well as provide a corresponding statement to merchants. The new law requires reporting entities 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 if there is a discrepancy between the merchant’s TIN and the associated information in the reporting entity’s records and the IRS’ records, the IRS requires the reporting entity to withhold a minimum of 28 percent of the merchant‘s future payments from card transactions. This withholding provision goes into effect for payments starting in 2012.
If we do not have a valid TIN on file that matches the Tax filing name with the IRS, we may be required to begin backup withholding in January of 2012. These amounts will be a percentage of your daily credit card deposits, and will be submitted to the IRS on a regular basis. You will only be able to recoup the withheld funds after you file your federal tax return. We will not be able to refund withheld amounts to you.
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.