A Thing
The Green SheetGreen Sheet

Friday, October 28, 2011

IRS offers relief on 1099-K reporting

The Internal Revenue Service said it has listened to complaints about new reporting requirements for merchant card receipts. Thus it is postponing some elements of the rules newly required under Section 6050W of the Internal Revenue Code.

In a pair of notices released Oct. 27, 2011, the IRS said it is delaying by one year the backup withholding requirements that kick-in when a covered business fails to provide a correct taxpayer identification number to an acquirer or network reporting annual card settlement payments via the new IRS Form 1099-K.

The agency also said it would delay by one year penalties for incorrect information provided the involved parties "make good-faith efforts" to furnish correct information.

More time to establish procedures

The IRS indicated the delay offers acquirers more time to develop necessary compliance procedures. "This notice does not apply to a payor who erroneously fails to file an information return or payee statement," the IRS stated. "Additionally, the relief provided by this notice only applies to information returns and payee statements pertaining to reportable payments made in calendar year 2011."

The new 6050W reporting requirement is part of an ongoing IRS program to recoup tax receipts lost to underreporting of income by businesses and individuals. The IRS has estimated the gap between income actually earned and what gets reported to the IRS exceeds $345 billion a year. It also has estimated that the successful implementation of the new regulations could add more than $10 billion to federal tax collection tallies in the first 10 years.

Rules in need of improvement

Numerous industry groups – including the Electronic Transactions Association, the Electronic Funds Transfer Association and the American Bankers Association – complained publicly that their members needed more time to make systems changes and other arrangements to assure compliance with the new reporting requirements.

And in July 2011, the U.S. Department of the Treasury's Inspector General for Tax Administration issued a report that asserted the new 6050W rules were burdensome to taxpayers and not very well thought out by the IRS. One example the Inspector General pointed out is that the rules do not make accommodations for cash-back situations (for instance, when customers using debit cards request cash back), which could result in mismatches between the 1099-K forms filed for those firms and income totals reported on the firms' tax returns. end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
A Thing