1099-K REMINDER TO BUSINESS OWNERS
For the upcoming tax return season, Bankcard Services informed business owners about the importance of IRS Form 1099-K,Payment Card and Third Party Network Transactions
1099-K, Payment Card and Third Party Network Transactions, is an IRS information return used to report certain payment transactions to improve voluntary tax compliance. In 2012, the IRS determined that there were lots of underreported income (tax gap) by businesses, and began using Form 1099-K to check transactions against what is reported as income on business tax returns.
Payment processing companies are required to report gross amount paid to merchants, and beginning of each New Year, the payers are required to backup withhold on Form 1099-K reportable payments if the merchant furnishes an incorrect TIN number or legal name.
If business owner fails to follow the backup withholding rules, acquirers will receive a ‘CP2100 Notice’ which may result in penalties for filing incorrect information returns, and also become liable for any uncollected amounts. According to IRS, “Government entities are subject to rules that require income tax withholding of 28% from certain payments if the payee is not exempt from backup withholding and fails to furnish correct taxpayer identification number (TIN).”
By January 31, 2017, retailers who accepted payments from credit, debit or gift cards will receive a 1099-K if its processing activity exceeds $20,000 and more than 200 transactions, so remember to review the forms for accuracy; Federal Tax Identification Number (EIN, for Corp., Inc., LLC, and Partnership) or Social Security Number (Sole Proprietorship), and all other business information.
Michelle Shin VP of merchant operations stated “In order to prevent serious damages, business owners must confirm business information with their card processing companies before Form 1099-K is issued. If you have already received the form, contact your payment processing company to confirm and match the records.”
For additional information on Form 1099-K, please contact 1-888- 339-0100 at any time.