A new Form 1099 requirement by the Internal Revenue Service will require businesses, banks and credit card payment processors to report gross annual payments to the agency as well as to merchants in an effort to combat underreporting of income.
The new forms require financial entities to report information reflecting business deposits of more than $20,000 annually or more than 200 debit or credit card transactions. For businesses receiving income through a payment processor, that income is now reportable and to be used on Form 1099-K, “Merchant Card and Third Party Network Payments.”
The new reportable income applies to any transactions wherein a payment card is accepted. The income must be reported utilizing Form 1099-K and copies must the be sent to the businesses and the IRS.
As a result, small businesses should consider staying vigilant with bookkeeping and accounting to ensure that these systems can accurately reconcile information reported on the new forms by financial firms and businesses.
New requirements delegate that merchants provide the full legal name of their business, address, and taxpayer or employer identification number. Beginning in 2013, merchants that do not provide the required information will become subject to mandatory backup withholding that will require payers to withhold 28 percent of the payment to the merchant.