Avoid potential penalties from the IRS by updating your tax info with your credit card processor

Article courtesy of SBAM Approved Partner Midwest Transaction Group

By Anne Heraghty

Recently a new draft of section 6050W of the IRS Code stated processors are obligated to report all companies’ annual credit and debit card processing activity. In order to do so, it is necessary for processors like MTG powered by Veracity (Midwest Transaction Group) to acquire the most current tax ID name and number for all clients in order to report their transactions accurately. Since the code was changed, MTG has contacted and corrected the information of roughly 1,500 businesses.

Some businesses, however, have not updated their information and the deadline to do so is quickly approaching. The deadline for processors to enforce a penalty for merchants operating under outdated tax ID name and/or number is January 2013.

While penalties for operating under outdated information may not begin until January, the tax reporting from your processor has occurred all year long. 1099-K reports must still be filed by your processor which will report all your business’ transactions from 2012. If your 1099-K form has missing or incorrect information, it will be rejected by the IRS. Merchants who do not work with processors to correct it will be subject to withholdings, by IRS mandate, beginning in 2013.

Start 2013 off right by paying close attention to the following formation:
 
Your tax ID name and number must match exactly with what the IRS has on file. If the name and number do not match, the processor will be required to withhold a merchant’s funds at a rate of 28 percent of the gross monthly transactions until the proper information is secured – not to be refunded until the following year as a tax credit. In other words, 28 percent of every transaction you process in 2013 will go directly to the federal government and not to you.

It is vital that you closely read all correspondence on this matter from you processor. Merchants should be prepared to cooperate with processors by responding quickly to correspondence to ensure that the information in their files matches the federal government’s files. If you haven’t heard from your processor but want to double check your information, give them a call.

Again, deadline for changes is January 1, 2013. Don’t be late. If your tax ID name and number are not updated with the IRS by January 1, processors will be forced to begin withholding funds.

If you have questions about the new code, please use MTG as a resource: 1.888.599.2209.