Effective 2011, all US payment providers are required by the Internal Revenue Service (IRS) to report merchants’ sales information to the IRS. According to the 6050W of the Housing Assistance Tax Act of 2008, gross sales amounts of payment card transactions must be filed with the IRS by merchant acquirers.
All merchants must comply with the 6050W reporting mandate to avoid penalties. Merchants who fail to provide updated information regarding their Taxpayer Identification Number could be subjected to backup withholding at a rate of 28% on their gross sales effective January 2012. The backup withholding garnishment would be sent to the IRS and only be made available from the IRS by filing your tax return.
“Under new section 6050W, any payment settlement entity making payment to a participating payee in settlement of reportable payment transactions must make a return for each calendar year to be filed with the Service, and furnish a statement to the participating payee, setting forth the gross amount of such reportable payment transactions, as well as the name, address, and taxpayer identification number (TIN) of the participating payees.”