The IRS has implemented new regulations that affect the reporting of electronic merchant processing income. As your merchant card processor we are required, along with our processing bank partners, to report all payments for merchants that meet the following criteria:
- Received more than $20,000 in gross payments in a single year AND
- Received over 200 payments in a single year.
This regulation affects the 2011 calendar year and all future years. At the beginning of 2012, merchants who fall into the above brackets will receive a 1099-K Form to detail their 2011 transactions and this will be reported to the IRS.
Because of these IRS changes, MerchantPlus is required to verify that all merchants have the proper “Tax Identification Number” (TIN) associated with their merchant account and that the business name on file with the IRS for that number matches your merchant profile. The TIN is either a Social Security Number (SSN) for sole proprietorships or an Employer Identification Number (EIN) for other business types.
**For MerchantPlus customers that process though iPayment Inc/Online Data Corp, please note there will be a one time $25 validation fee added to your March, 2011 merchant statement. There will also be an additional $4.95 monthly recurring fee starting on this statement.**
We are currently verifying all account records with the IRS and will notify merchants if any errors are detected.
In accordance with the IRC Section 6050W, any merchant in the database that has a mismatch IRS status will have 28% of their funds withheld stand remitted to the IRS starting January 1, 2012.
Here are some key points to take into consideration about the new legislation:
- ALL merchant types are affected: corporations, LLCs, non-profits, partnerships, sole-proprietorships, etc.
- Merchants must exceed both the $20,000 gross payment volume AND the 200 transactions threshold to receive a 1099-K form.
- The $20,000 gross payment volume is the total amount processed. Adjustments for discount amounts, fees, refunds or any other amounts will not be subtracted.
- Multiple merchant accounts that use the same TIN and whose totals exceed both thresholds will need to report each account on the 1099-K forms.
MerchantPlus is working hard to make this process as pain-free for our merchants as possible. If you think you may affected and have any questions, please feel free to contact us at 800-546-1997 or at firstname.lastname@example.org.
For further information, please see IRS citations below:
- Official IRC 6050W Declaration: http://www.irs.gov/irb/2009-09_IRB/ar11.html
- 1099-K Instructions: http://www.irs.gov/instructions/i1099k/ar02.html