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The Green Sheet Online Edition

March 14, 2011 • Issue 11:03:01


Is it OK to charge IRS reporting fees?

I commented in GS Online's MLS Forum on the IRS reporting issue ... I raised this issue because it appears to me, and some of my MLS associates, that some processors will be using the requirement to report information to the IRS as a means of adding fees and enhancing their revenue.

I would love to see The Green Sheet get ahead of this with an article exploring what, if any, the cost is for a processor to report the IRS required information. The idea that a processor must charge a fee to a merchant to verify their glos TIN makes little sense. The processor should have validated such information when the original application was submitted and entered into their system. Therefore the need to validate is their responsibility, and the cost for doing so should be by them.

Tom Gregory
N4NW LLC - Complete Merchant Services


Comments in an MLS Forum discussion thread titled "IRS can take 28 percent of merchant gross V/MC starting Jan 2012?" appear to indicate complying with this requirement can be quite time consuming, at least initially. Whether it is aboveboard or makes long-term business sense to charge merchants for this is an excellent question. We'd love to hear from other people about this and will ask one of our contributing writers to delve into this topic.

We have touched on the IRS reporting issue previously but haven't discussed whether collecting this information is something processors can charge merchants for. Most recently, advisory board member Justin Milmeister, President of Elite Merchant Solutions, stated the following in "Game changers for 2011 - Part 2," The Green Sheet, Feb. 28, 2011, issue 11:02:02:

"Another game-changer is the IRS reporting requirement stemming from the Housing and Economic Recovery Act of 2008, which begins for transactions on Jan 1, 2011, and will require merchant acquirers to report the gross processing volumes from their respective merchants. Now, if the tax identification number (TIN) and business legal name does not match what the IRS has, or if it is nonexistent, the merchant will be subject to IRS withholdings. The kicker here is that even when you do cure this problem, it can take a fair amount of time to get your funds released."

Adam Atlas wrote in detail about the new reporting requirements in "Making hay of new IRS reporting requirements," The Green Sheet, Nov. 8, 2011, issue 10:11:01. He did not suggest processors charge merchants for their efforts related to the requirement, but he did mention there could be an upside to the reporting.

He wrote that "you can use this as an opportunity to educate merchants about how they can use the reporting to enhance their business practices and to help ensure they do not run afoul of the IRS. Doing so will, at the very least, make you look good, which could mean happier customers and a stickier portfolio."

Thank you for bringing this issue to our attention. We hope this is the beginning of a spirited, enlightening discussion.


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