IRS Reporting Regulations

Learn more about the following:

New IRS Reporting Regulations (2012)

Q: Why am I required to report my electronic payment transactions?

A: Beginning with the 2011 tax year, Section 6050W of the 2008 Housing Assistance Act will require all merchant acquiring entities to report the gross amount of each merchant’s payment card transactions on Form 1099-K to the Internal Revenue Service (IRS).

Q: Do all merchants have to report their electronic payment transactions?

A: The new IRS regulations require that U.S. third-party settlement organizations and payment processors file Form 1099-K to report unadjusted annual gross sales information for merchants/sellers that meet both of the following thresholds in a calendar year:

  • More than $20,000 in gross sales, and
  • More than 200 transactions.

Q: Is the $20,000 calculated based on net sales or gross sales?

A: As required by the IRS regulations, the $20,000 is calculated based on unadjusted gross sales (unadjusted for fees or refunds). The amount the buyer paid for an order is the gross sales amount for the order, even if a rebate applies or the order is later refunded. When you make a sale, the order total becomes a permanent part of your unadjusted gross sales for the year. Please seek advice from a tax professional to understand the appropriate adjustments when preparing your tax return.

Q: Who is required to report this information on behalf of merchants?

A:┬áMerchant acquiring entities (like Nationwide Payment Solutions) – These are institutions responsible for settling payment card payments to its participating payees.
Third-party settlement organizations – These are arrangements where participating payees have agreed to accept payment by having a third-party settlement organization transfer funds through its third-party network to the account of the participating payee. Electronic check transactions, American Express, Discover, etc.

Q: Are my customers impacted by this?

A: The IRS has emphasized that individual cardholders are unaffected by this requirement, and none of the cardholder’s personal information will be shared with the IRS.

Q: How do I know if my processor has my correct Tax Identification Information to submit to the IRS?

A: To ensure compliance with this law, Nationwide Payment Solutions is participating in the IRS’ Name and Tax Identification Number (TIN) Matching program. Nationwide will send important Tax Identification Information that we have on file to the IRS to obtain a “match”. As long as the IRS confirms that the information NPS has on file matches what the IRS has on file, you don’t need to take any further action. NPS will notify you by letter and by phone if our information for you does not match the IRS records.

Q: What if the information on file with Nationwide Payment Solutions does not match what is on file with the IRS?

A: If the information we have on file does not match the IRS, please submit a signed W9 to us as soon as possible at 877.766.6896. Please be sure to reference your Merchant ID # and a contact number you can be reached at if we should have any questions.

Q: What will happen if I do not update my information with my processor to match IRS records after they have notified me the information differs?

A: Failure to update your records could result in the IRS imposing a 28% federal backup withholding on your settlement payments, as well as a $50 fine.

More information regarding Section 6050W of the Housing Assistance Act can be found at www.IRS.gov