Dice 7 Readies for IRS 1099-K Reporting Requirements
|Dear Valued Partners, Beginning January 1, 2012, the U.S. Internal Revenue Service will enforce new legislation that will direct payment processors to report merchants' gross receipts via card transactions. The purpose of the legislation is to ensure that merchant income derived through card transactions is properly reported as income to the IRS. The IRS defines a payment card as any debit or credit card, including any stored-value card having prepaid value, as well as gift cards.|
What is reportable?
The aggregate gross receipts of all payment card transactions, whether online or at the point of sale, and third-party network transactions for any business or self-employed individual accepting such payments.
The proposed regulations define the gross amount as the total dollar amount of aggregate reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.
More information on the specific requirements, including details on non-reportable transactions and other exceptions, are outlined in the IRS' Instructions for Form 1099-K: http://www.irs.gov/pub/irs-pdf/i1099k.pdf
What is required from our Sales Partners?
It is essential that we all impress upon the Merchants how important it is that they respond to our requests for correct information regarding their respective Tax Identification Number (TIN) and Tax Filing Name (TFN). In cases where a Merchant contacts you for more details, please advise them of the implications of the 1099-K legislation by using the information contained in this document. If anyone requires further details, please direct them to the websites indicated below:
IRS Final Rules and Regulations
IRS Frequently Asked Questions about Backup Withholding
What happens if TIN or TFN information is missing or invalid?
The IRS will require our processors, as an obligated reporting entity, to withhold Merchant funding by deducting and withholding 28%, plus additional amounts varying by state, from reportable transactions if a Merchant's TIN is missing or noticeably invalid beginning January 1, 2012. Once the proper information is submitted to the IRS, the withheld funds will only be returned to the Merchant after their next annual return.
In order to comply with the IRS requirements, we are taking the following steps:
· JUNE 2011: We are working diligently to identify any Merchants who do not currently have a valid TIN or TFN on file. In efforts to ensure that all our Merchants are compliant with the new legislation, we will be verifying the information with the IRS.
· AUGUST 2011: We will send a letter directly to each Merchant for whom we still do not have an accurate TIN or TFN. Within the letter, we will provide them 3 reporting options:
(a) Online, via a secure reporting website portal (our preferred method).
(b) Emailing information to a designated project address.
(c) Telephoning a dedicated 1-800 number.
In all cases, the Merchant will be asked to provide us with the following information:
1. Business name, as registered with the IRS.
2. Company email address.
3. Company phone number.
4. Business address.
5. IRS tax ID number.
Key IRS reporting dates:
· JANUARY 2012: Merchant reporting to the IRS (1099-K) will begin. We may be required to begin backup withholding in 2012 for Merchants who are not yet compliant, i.e. do not have a verified TIN and TFN, and submit the amounts to the IRS and state agencies, if applicable, on a regular basis. Merchants will only be able to recoup the withheld funds once they file their tax return for the applicable tax year. We will not be able to refund withheld amounts to them once backup withholding begins.
· MARCH 2012: As part of the Annual Information Return, reporting will include monthly and annual gross sales totals for the previous calendar year.
As you can understand, this is a vast and complicated undertaking that Pivotal Payments is moving forward with, but rest assured we are doing so with one priority in mind: it is our aim to have all our Merchants 100% compliant with the IRS legislation before the deadline to ensure they do not experience any disruption in service. We have created a multidisciplinary team internally to not only manage the transition, but also manage the new reporting and withholding process in 2012.
Thank you for your support as we diligently work to ensure all of our Merchants are compliant.