IRS Rules in Favor of ETA on Merchant Transaction Reporting

September 6, 2013 – The IRS recently announced that it has ruled in ETA’s favor on proposed changes to IRS 6050W, merchant transaction reporting.  ETA advocated for a one-year delay of the implementation of backup withholding (or B notice process) for merchants who have missing or incorrect TINs.  ETA sent a letter to the IRS in May outlining the industry’s strong concern about the impact on small and medium sized merchants as well as the economy as a whole if backup withholding were to be started in the fall of 2013.  Since that letter, ETA has been engaged in ongoing communication with the IRS to amplify the message within the government. The announcement is great news for merchants and acquirers will be given another year to work out the issues with missing and incorrect TINs.

The correspondence from the IRS to ETA reads as follows:

We are pleased to inform you that the Internal Revenue Service has decided to delay the inclusion of Form 1099-K in CP 2100 and CP2100A notices for an additional year.  A formal announcement (Notice 2013-56) will be released in Internal Revenue Bulletin (IRB) Number 2013-39 scheduled to be printed September 23, 2013.

The Internal Revenue Service will not issue CP 2100 or CP 2100A notices based on incorrect name and TIN combinations reported on Forms 1099-K filed in 2013 for calendar year 2012 payments.  As a result, payers will not be required to begin backup withholding on payees with an incorrect name and TIN combination with respect to these forms.  Beginning in late 2014, IRS will issue CP2100 and CP2100A notices based on incorrect name and TIN combinations reported on Forms 1099-K filed in 2014 for calendar year 2013 payments.

The IRS will also provide relief from penalties for failure to include correct information under sections 6721 and 6722 for (1) incorrect name and TIN combinations reported on Forms 1099-K filed for calendar years 2012 and 2013 payments; and (2) missing and obviously incorrect TINs reported on Form 1099-K filed for calendar year 2012 payments.

We developed a document to assist payment settlement entities (PSEs) to obtain correct taxpayer identification numbers (TINs) and names from their customers.  We understand that often times this process is difficult.  The attached Notice 1430 can be used as a “stuffer” to include with the monthly statements sent to customers.

We appreciate our partnership with your group and value your perspective.  We recognize the complexities associated with complying with these requirements and are particularly mindful of the related burdens on tax professionals, business and individual taxpayers.  We continue to welcome your ideas for improvements, along with your feedback about how these requirements effect your organization and its members.

Thank you for your interest and sharing your concerns.

Internal Revenue Service

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