The Housing Tax Act of 2008 included the enactment of section 6050W of the Internal Revenue Code which requires merchant account processors to report merchants total gross processing amounts to the Internal Revenue Service. The reporting entity must also provide merchants with a corresponding 1099-K form.
This new requirement includes all processors and merchants, unless the merchant processes less than 200 transactions a year or total transaction payments is less than $20,000. Reporting begins in January 2012 and includes all transactions beginning January 2011.
All merchants must provide their processors with their valid tax identification number (TIN) and tax filing name. If a merchant fails to provide the TIN and tax filing name, or there is a discrepancy between the information provided and the information on file with the IRS, the merchant account provider will be required to hold taxes on future transaction funds. The backup withholding is currently 28%.
Merchants must ensure that the TIN and tax filing name provided to their processor matches what is on file with the IRS to avoid any future backup withholding.
More information on Section 6050W of the Internal Revenue Code
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