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Table of Contents

Lead Story

Payments industry boldly moves forward

News

Industry Update

FDIC warns banks about processors

IRS backs down on reconciliation requirement

Facebook becoming a payment business

Trade Association News

Features

GS Advisory Board:
Views on IRS reporting and TIN matching

It's time to build your sales force

Marc Beauchamp
Performance Training Systems

An interview with Harold Montgomery

Ken Musante
Eureka Payments LLC

Research Rundown

ISOMetrics:
Commanding retail categories

Minimal (but effective) marketing makeovers

Selling Prepaid

Prepaid in brief

Glitch in Google Wallet raises security concerns

FIs awaken to prepaid's power

Views

Shop small, shop local

Patti Murphy
ProScribes Inc.

Education

Street SmartsSM:
The ins and outs of marketing

Bill Pirtle
C3ET Credit Card Consortia for Education & Training Inc.

Legal strategies for an evolving marketplace

Adam Atlas
Attorney at Law

Modern payment pros fill the knowledge gap

Nicholas Cucci
Network Merchants Inc.

MLSs are masters of change

Dale S. Laszig
Castles Technology Co. Ltd.

Company Profile

Harbortouch

New Products

Mobile wallet commerce platform

Apriva Wallet
Apriva LLC

Inspiration

Are you trying too hard?

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

February 27, 2012  •  Issue 12:02:02

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IRS backs down on reconciliation requirement

Under pressure from retailers and Congress, the Internal Revenue Service confirmed on Feb. 9, 2012, it will not require merchants to reconcile actual gross transaction receipts reported on their 1099-K forms with the aggregate gross receipts they report on their taxes.

The Housing and Economic Recovery Act of 2008 requires merchants to report the gross amount of yearly transactions to the IRS on form 1099-K. The reporting requirement went into effect Jan. 1, 2012. In October 2011, the IRS added a line to business tax returns requiring merchants to reconcile actual gross receipts with the aggregate gross receipts on their 1099-K report.

NFIB objection

The National Federation of Independent Business strongly objected to the new reporting requirement because small businesses often don't have the sophisticated accounting systems needed to reconcile the gross receipts reported on the 1099-K form with the actual gross sales. For example, the NFIB noted that merchants often give cash back to customers using a credit or debit card. Gross receipts in this case may be overstated by the difference between the actual sale and the cash back. In another example, merchants often give customers cash reimbursements for returned merchandise. The gross receipt would not account for the returned item and refund.

Congressional objection

Legislation introduced by Rep. Aaron Schock, R-Ill., and Rep. Bobby Schilling, R-Ill., on Feb. 1, 2012, would prohibit the IRS from requiring merchant transaction reconciliation. Mirror legislation was subsequently introduced in the Senate by Sen. John Thune, R-S.D., and Sen. Maria Cantwell, D-Wash.

"This is an unnecessary IRS requirement that will only lead to more accounting headaches for businesses," Schock said. "My concern is that the IRS is asking for flawed information from small businesses by requiring them to reconcile their internal numbers with that of third-party entities. When you take into consideration all of the types of merchant transactions that occur between a customer and a small business, all this adds up to unnecessary administrative costs, a new accounting burden and more time away from growing their business." Sen. Thune added, "The overreaching and unnecessary 1099-K tax reporting requirement will create a paperwork nightmare for small businesses already struggling in a weak economy."

IRS reconsiders

Steven T. Miller, IRS Deputy for Services and Enforcement, responded to the concerns of the lawmakers and the NFIB in a Feb. 9 letter to Susan Eckerly, NFIB Senior Vice President for Public Policy. "There will be no reconciliation required on the 2012 form, nor do we intend to require reconciliation in future years," Miller wrote. "Our intention is that the reporting of gross receipts and sales on the 2012 income tax forms will be modeled on the 2010 income tax forms. No other changes to these forms related to payment card reporting are contemplated."

After the IRS backed down, Steve Dutton, a spokesman for Rep. Schock, said, "Overall this is a step in the right direction, but we won't know for sure until we see the 2012 draft forms that come out this summer. Businesses still need certainty that this issue won't emerge again sometime in the future. The Schock/Schilling and Thune/Cantwell bills provide a legislative fix to prevent this from ever becoming a reality." NFIB CEO Dan Danner said, "This is a small, but important victory for small business, and we appreciate the IRS working to alleviate the concerns of small-business owners on this issue. While NFIB was able to achieve this victory by working directly with the IRS, we were also closely working with the offices of senators Thune and Cantwell and congressmen Schock and Schilling to permanently remove this requirement."

For additional news stories, please visit www.greensheet.com and click on "Read the Entire Story" in the center column below the latest news story excerpt. This will take you to the full text of that story, followed by all other news stories posted online.

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

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