Tax Code Updates
In 2011, the Internal Revenue Service implemented Section 6050w of the tax code requiring 1099-K reporting of information from credit, debit, and other electronic payment methods. Beginning in 2013, merchants were required to file 1099-K’s to avoid fines and penalties for non-compliance.
If your business processes credit cards, you will receive either a 1099-K every January or a fine from your credit card processing company stating that your information was reported incorrectly.
Processors and merchants alike must focus on collecting correct information.
Understanding your 1099-K form:
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For merchants, incorrectly-filed 1099-Ks will be returned with a B-Notice, a minimum $100 fine, and a maximum penalty of up to $1.5 million (depending on the size of the business).
Additionally, any A business that accepts credit cards for goods or services. who does not file the correct information is subject to backup withholding, meaning that the Any bank, financial institution, and public or private company that maintains a seller’s credit card processing relationship and receives all transactions from the seller to be distributed to the credit card issuing banks. that filed the 1099-K must withhold a percentage of that merchant’s income until when the tax information can be amended/corrected.