IRS Releases Draft Rule for 6050W Merchant Reporting Requirement
The Internal Revenue Service (IRS) issued proposed regulations Nov. 23 requiring that, starting with transactions in calendar year 2011, the gross amount of payment card and third-party network transactions be reported annually to participating merchants and the IRS. The Housing and Economic Recovery Act of 2008 created a new reporting requirement for members of the electronic payments industry. The new law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants.
These proposed regulations contain rules to implement reporting of credit card, debit card and similar transactions, as well as transactions settled through third-party payment networks, such as third-party organizations that settle online transactions. The IRS also released for comment a draft version of new Form 1099K, Merchant Card and Third-Party Payments, which will be used to make these reports. Form 1099-K is similar to the existing Forms 1099 used to report interest, dividends and other payments. The first information return covering calendar year 2011 must be filed with the IRS and furnished to participating merchants in early 2012. Among other things, the proposed regulations describe who is required to file a return and which payment card and third-party network transactions are subject to the reporting requirement. The proposed regulations also provide examples.
Comments on the proposed regulations and the draft Form 1099-K must be received by Jan. 25, 2010, and may be submitted electronically, by mail or hand delivered to the IRS. A public hearing is scheduled for Feb. 10, 2010, in Washington, D.C.
Meanwhile, the IRS continues to encourage payments professionals to familiarize themselves with the TIN matching program. Payments-related businesses can begin now to register, receive approval, and learn the TIN matching system before any reporting is required by law. Three IRS publications explain the TIN matching program and are available to you on the ETA website:
1. IRS Revenue Procedure 2003-9 T.D. 9041 ; Dept. of the Treasury Internal Revenue Service 26 CFR Part 31: “Taxpayer Identification Number (TIN) Matching Program.” This explains the TIN matching program on pages 510-522.
2. IRS Publication 2108A : “On-Line Taxpayer Identification Number (TIN) Matching Program.” This explains the online TIN matching program and how it might apply to merchant acquiring banks.
3. IRS Publication 1281 : “Backup Withholding for Missing and Incorrect Name/TIN(s).” This discusses obligations and penalties regarding backup withholding for missing name/TIN information.
On a related note, on February 6, 2009, the IRS issued Announcement 2009-6 addressing the requirements of new tax code Section 6050W, which covers the newly legislated information returns reporting the number and value of certain merchant sales. The IRS states in the Announcement that any person required to complete information returns under tax code Section 6050W may use the taxpayer identification number matching procedures described in Revenue Procedure 2003-9 to verify payee TINs before making information returns.
ETA will coordinate an effort to provide input on behalf of its constituents to this process. Please contact Mary Weaver Bennett at ETA (202-828-2635 or
) if you have questions.
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