by Jackie Steed
In 2011, the Internal Revenue Service implemented Section 6050w of the tax code requiring the 1099-K reporting of information from credit, debit, and other electronic payment methods. Processors have had two years to prepare their systems and validate the information for the beginning of the 2013-mandated requirement to file 1099-K’s to avoid fines and penalties for non-compliance.
If your business processed credit cards in 2011, you most likely received either a 1099-K in January, 2012 or fine from your credit card processing company stating that your information was reported incorrectly. Now that 1099-K regulation is fully enforced, any incorrectly filed 1099-Ks will be returned with a B-Notice, a $100 fine (up from $50) and a maximum penalty of $1.5 million. That means processors and merchants must focus on collecting the correct information now.
More importantly, a merchant who does not file the correct information is subject to backup withholding; the acquirer that filed the 1099-K must withhold 28 percent of that merchant’s income until a time when the tax information is amended. For many small merchants, not receiving 28 percent of their income may be the difference between profit and loss and possibly losing their business.
On another similar note, merchants must make sure that your credit card processor has the correct TIN (Taxpayer Identification Number) and taxpayer name or you could be subject to 28% withholding from your merchant account deposits beginning January, 2013. We highly suggest that you are in contact with your processor to ensure that they have all of your correct information.
For more information on this topic, join me on January 15th at 1pm at 43620 Ridge Park Drive in the conference center on the third floor for an educational luncheon and learn more about the new tax reporting requirements for your merchant account. RSVP by calling (866) 509-7199 ext. 3058 as space is limited.
Jackie Steed is the Business Development Manager at the National Merchants Association. The National Merchants Association is a nationwide association dedicated to reducing the unnecessary fees involved with credit card processing. As a member of The National Merchants Association, you not only save on your merchant processing but you gain a partner in business development. To find out more about NMA, visit their website www.nationalmerchants.org or call them at 866-509-7199