(Filed Under Financial and General Interest News). A report from Steve Kimberling of Intimate Payments is alerting retailers that new federal regulations for electronic payment transactions going into effect January 2012 may have dramatic business effects.
Beginning this month, merchant acquiring entities will verify a business’ tax identification number (TIN) by matching the number with the legal business name on file. The merchant bank must then file a Form 1099-K with the IRS that includes credit, debit and gift card transactions. If a merchant has two payment processors during a fiscal year, it will have two separate filings.
Merchant banks will be fined $250 for each error submitted. Errors may occur if a business’ TIN does not match the IRS’ records of the business, which may easily occur — differences in the spelling or punctuation of a retailer’s name can lead to a mismatch. If a mismatch does occur, the IRS allows the bank to withhold a merchant’s funds, allowing only 30 days to correct the error.
Starting in 2013, if a mismatch occurs, the processor will withhold 28 percent for IRS processing fees. Even after the mismatch is identified and corrected, any withholding paid to the IRS or state must be recovered by the business at the time taxes are filed, which could damage a retailer’s cash flow and budget planning. If there is a mismatch, retailers should immediately work to rectify the error to avoid any damaging fees.
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