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Playing The Match Game With The IRS

October 31st, 2011

 

Now You Have A Little More Time To Fall In Line.

 

Good news. The deadline for complying with the IRS mandate related to the Housing and Economic Recovery Act of 2008 has been extended a full year, until January 2013.

In an effort to ferret out underreported or unreported business income, the IRS devised a plan within the Housing and Economic Recovery Act of 2008 that requires payment processing networks to report a merchant’s monthly processing volume along their TIN (taxpayer identification number) and legal name. To ensure this reporting system is functional and accurate, the IRS requires that the TIN & legal name on the merchant account matches the data they have. If the IRS records and merchant account information do not match, the merchant has to complete Form 1099K and the processor must submit it to the IRS.

The penalty for not complying with this new Act is the imposition of backup withholding to the tune of 28% of the merchants gross credit card revenue. Backup withholding is similar to the payroll tax withholding all merchants with employees are familiar with. The difference here is that the IRS would order the credit card processor to hold back 28% of the merchant’s credit card processing receipts and turn it over to them.

The mandate for compliance began at the beginning of 2011. While the IRS still requires reporting on Form 1099-K by the end of 2011, they are delaying the enforcement of the backup withholding aspect of the plan until January 2013. The IRS decided to extend the deadline after numerous complaints from the processing industry citing problems with consistency in the form as well as difficulties in collecting these forms from merchants.

So, if you have completed your 1099K and returned it to your merchant services provider, good for you- you are in the clear. If you have not received notice or a form, contact your provider right away. Otherwise you may find 28% of your credit card sales zapped after 2013.

 

Here is a link to the original IRS publication concerning this requirement: http://www.irs.gov/pub/irs-news/reg-139255-08.pdf

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Entry Filed under: Advice,Rules and Regulations

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