Call 1 (877) 71-Atlas
7 1 2 - 8 5 2 7

Tax ID Validation

Important IRS requirements from January 2012

The days of unchecked internet transactions have entered their gloaming as the IRS introduces a new tax form, the 1099-K, as a way to track debit, credit and even gift card transactions. Merchants that conduct transactions exceeding $20,000 or 200 transactions a year will be required to fill out the form for 2011 come April 2012. The move is perceived by many as a means to end untaxed and “underground” transactions, as its passing was largely concealed in The Housing Assistance Tax Act of 2008, which was labeled as “a bill to provide needed housing reform and for other purposes.” Unfortunately for the unsuspecting public, the new requirements on merchant reporting slipped through without much attention. Merchants will be receiving the 1099-K from their transaction processing companies in early 2012.

The Federal Housing Assistance Tax Act of 2008 included the enactment of new Section 6050W of the Internal Revenue Code (Section 6050W) that requires reporting entities to annually report payments in settlement of card and payment third party network transactions to the IRS for all merchants.

Section 6050W also requires reporting entities to perform backup withholding from merchant funding by deducting and withholding income tax (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, or (b) the IRS notifies the reporting entity that the TIN (when matched with the name) is incorrect. Merchants subject to Federal income tax backup withholding may also be subject to backup withholding for specific states as applicable. To avoid backup withholding, beginning in January 2012, it is very important that merchants provide the correct name and Tax Identification Number (TIN) that is used when filing their tax return that includes the transactions for their business

Please contact us should you have any further questions.

 

1 (877) 712-8527
Follow Us: LinkedIn Facebook Twitter