Reporting on Merchant Payment Cards – Form 1099-K
Whose merchant card payments must be reported?
Merchant acquiring entities must report the gross amount of reportable transactions of any payee for whom they settle payment card transactions. A reportable payment card transaction is any payment in which a payment card or any indicia thereof (such as a credit card number) is accepted as payment.
Whose third-party network transactions must be reported?
Third-party settlement organizations must report the gross amounts of reportable transactions of any payee for whom they settle payments using their network provided that a payee’s reportable transactions exceed $20,000 and the aggregate number of those transactions exceeds 200.
How are reportable transactions to be reported? Will there be a new form?
Payment settlement entities will report gross transaction amounts on the new Form 1099-K, Merchant Card and Third-Party Payments.
What information must be reported?
The form requires reporting, with respect to any one payee, of the gross amount of reportable transactions for the calendar year and its corresponding months. The reporting of both annual and monthly amounts is necessary in order to reconcile differences between information returns and tax returns of fiscal year filers. The name, address, and taxpayer identification number of each participating payee must also be included on the form.
When are Forms 1099-K due?
Under the new law, information reporting for payment card and third party network transactions are due to the IRS by February 28 (March 31, if filed electronically), of the year following the transactions. The first 1099-Ks will be due for calendar year 2011, and must be submitted to the IRS by February 28, 2012 (March 31, 2012 if filed electronically).
What are payee statements and when are they due?
Payment settlement entities must furnish a “payee statement” showing the information reported to the IRS on Form 1099-K to each participating payee. The statements must be provided by the reporting entity to the payee by January 31 of the year following the calendar year for which the return was made. The first payee statements must be furnished by January 31, 2012.
What is the de minimis standard for reporting? Does it apply to payment card transactions?
The de minimis standard exempts the reporting of transactions settled by a third party settlement organization of a payee in a third party payment network if the aggregate payments to the payee do not exceed $20,000 or if the aggregate number of transactions does not exceed 200. This applies only to the payments settled by third-party settlement organizations. The de minimis standard does not apply to payment card transactions.
What constitutes the “gross amount” of reportable transactions? Does the “gross amount” include fees, charge-backs or other costs and refunded amounts?
The “gross amount” of reportable transactions means the total dollar amount of aggregate transactions without regard to any credits, charge-backs, fees, cash equivalents, discounts, refunds, or any other amounts. The “gross amount” is strictly the total dollar value paid to the participating payees before any fees, refunds, or any other amounts are considered.
Are foreign payment settlement entities subject to the reporting requirements?
Yes, the statute and regulations establish that a “payment settlement entity” may be a domestic or foreign entity.
What qualifies as a “payment card”?
Under the regulations, a payment card is a card, issued to a cardholder that a network of unrelated persons has agreed to accept as payment under an agreement that provides standards and mechanisms for settling the transactions between a merchant acquiring bank or similar entity and the providers who accept the cards as payment. The term “payment card” includes credit cards, debit cards, and stored-value cards, as well as payment through any indicia of a payment card (such as a credit card number).
- Form 1099-K
- Form 1099-K Instructions
- Final Regulations Text (8/13/2010)
- Final Regulations Explanation
- Announcement 2009-6: Taxpayer Identification Number (“TIN”) Matching Program Is Available to Persons Required to Make Returns Under New Section 6050W of the Internal Revenue Code
- On-Line Taxpayer Identification Number (TIN) Matching Program Publication 2108A
- Frequently Asked Questions
- Notice 2011-71 provides guidance under section 6050W of the Internal Revenue Code regarding the documentation and reporting obligations of payment settlement entities that are United States payors making payment outside the United States to an offshore account.
