On July 30, 2008, the Housing and Economic Recovery Act of 2008 was signed into law and a new reporting requirement was created for members of the electronic payments industry.  Federal regulations implementing this law are not yet complete and specific requirements regarding responsible parties and mandated actions are still unknown.  However, as preparation for compliance, you should become familiar with the Internal Revenue Service’s (IRS) Taxpayer Identification Number (TIN) matching program before any new reporting requirement associated with TIN matching and withholding goes into effect on December 31, 2010.

The new requirement will likely require payments-related businesses to keep track of the number and dollar amount of merchant transactions by each merchant’s Taxpayer Identification Number, or TIN.  In certain cases, tax withholding may also be a part of this activity.  This data would then be reported to the IRS on an annual basis. 

Currently, federal regulations addressing this requirement are in the beginning stages of development at the IRS.  The IRS’s goal is to have a Notice of Proposed Rulemaking (NPRM) issued before June 30, 2009.  This will be the first version of the proposed regulations and will be open to public comment.  ETA will coordinate an effort to provide input on behalf of its constituents to this process.

In the meantime, the IRS is encouraging 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.

The Announcement is scheduled to be published in Internal Revenue Bulletin 2009-9, dated March 2.

ETA will continue to monitor developments at the IRS regarding this program.  Please contact Mary Weaver Bennett at ETA (202-828-2635 or ) if you have questions regarding this alert.