What is required of ISOs & Agents?
It is important for sales offices to support their merchants and act as a consultant, if necessary. Always ensure that the merchant’s Federal TIN and legal business name match the information that is on file with the IRS.
What is the Internal Revenue Code Section 6050W?
Section 6050W is an IRS regulation that requires merchant acquiring entities to report the annual gross dollar amount of payment card transactions settled for each merchant. Click here
to read the final ruling in the Federal Register.
When did the regulation go into effect?
The final regulations were released August 15, 2010 requiring merchant acquiring entities to begin reporting 2011 volume in January 2012.
Who is affected by IRS Code 6050W?
Every merchant who accepts payment card transactions as payment is affected by this regulation. All merchant acquiring entities are affected because they are responsible for filing form 1099-K.
What is Form 1099-K?
Form 1099-K is the information return the IRS has developed for compliance with IRC Section 6050W. This form reports the gross dollar amount of payment card transactions for the merchant during the prior calendar year. The form is filed using the merchant’s legal business name and Federal Tax Identification Number (TIN).
Will all merchants receive a Form 1099-K?
All merchants that accept payment card transactions as payment will receive a form 1099-K, which will be mailed to merchants by January 31, 2014.
What amount is reported to the IRS on Form 1099-K?
The amount reported on Form 1099-K is the merchant's gross volume. The gross volume does not include deductions for refunds, returns, chargebacks or other fees.
What is a merchant acquiring entity?
According to the IRS, a merchant acquiring entity is a bank or other organization contractually obligated to make payment to merchants in settlement of payment card transactions.
What if I have questions and want to talk to someone?
If you have any questions or concerns please contact your Client Relations Consultant or Agent Support. You may direct your merchants to contact the IRS at 1-800-829-0115 Option 2.
What happens if a merchant does not supply their correct Federal TIN or legal business name?
Fines and backup withholding will be assessed for each merchant account in which the legal business name and Federal TIN do not match the information on file with the IRS. In a no match situation, backup withholding will be implemented by the merchant acquiring entity at a rate of 28% on gross card payments, in accordance with the IRS rules and regulations. Additionally, merchants may be subject to state imposed tax levies. Funds held as a result of the IRS regulation will be forwarded to the IRS and merchants will have to contact the IRS directly for release of any withheld funds.
What is backup withholding?
Backup withholding is a penalty imposed by the IRS on merchants who fail to provide or correct their Federal TIN and legal business name with their merchant acquiring entity. Backup withholding is imposed at a rate of 28% of merchant’s daily gross processing.