Taxpayer Identification Number Compliance
The Internal Revenue Service (IRS) issued final regulations requiring that, starting with transactions in calendar year 2011, the gross amount of payment card transactions be reported annually to merchants and the IRS. These final regulations contain rules to implement reporting of credit card, debit card and similar transactions. As of January 2012, every payment settlement entity files a 1099-K form with the IRS reporting the gross amount of each merchant’s card transactions for the prior year, as well as provide a corresponding statement to each merchant.
The new regulations require that the merchant’s Taxpayer Identification Number (TIN) and legal name, as listed in its 1099-K, match what is on file with the IRS. If a merchant fails to provide its TIN, or if there is a discrepancy between the TIN and/or legal name the merchant previously provided and the TIN and/or legal name on file with the IRS, then the IRS may require the reporting entity to withhold a portion of the merchant’s future payments from card transactions (the withholding rate is currently set at 28%). This withholding provision went into effect in 2013. Merchants will be issued annual information reports, known as 1099-Ks. This report, which is issued to both the IRS and the merchant, identifies the merchant’s gross card transaction payments.
To help you understand and comply with the new regulations, we have provided a list of Frequently Asked Questions.