1099-K Internal Revenue Code (IRC) Section 6050W
Form 1099–K is used to report income received from income received from electronic payments such as credit cards, debit cards, PayPal, and other third party payers. In most cases, the payment settlement entity (PSE) will send you a 1099–K by January 31.
Section 6050w of the IRS tax code enacted by the Housing Assistance Tax Act of 2008 took effect on January 1, 2011 and required payment processors to report merchant income to improve tax compliance by businesses that accept credit cards.
Processors must report all settled payment card transactions under section 6050w, as well as perform backup withholding at a rate of 28% beginning in 2012 for merchants that have incorrect TIN or tax filing names. Merchants should confirm with their processor that they have the correct individual Tax Identification Number and tax filing name.
The IRS must receive the total payment volume received by US account holders whose payments exceed both below levels per year:
- $20,000 in gross payment volume from sales of goods or services.
- 200 separate payments for goods or services in the same year.
A Merchant’s payment processor should ask their payment processor to update their account(s) with a tax ID number, if they do not already have one. A Merchant’s tax ID number could be one of the following:
- Your Social Security Number (SSN)
- Your Employer Identification Number (EIN)
- Your Individual Tax Identification Number (TIN)
Below are guidelines to determine which tax ID number a Merchant should provide. A Merchant should keep in mind to use the tax ID number that they use when reporting any taxable income related to their Merchant Account to the IRS.
Business Entities with an EIN: Merchants who operate through a business legal entity such as a corporation or partnership provide the company EIN and company name.
Sole Proprietors with an EIN: Merchants who operate as a sole proprietor using an EIN, provide company EIN and their own name. They should not provide a business name or a DBA name (“Doing Business As”) with their EIN.
Individual Sellers and Sole Proprietors without an EIN: Merchants who are an individual seller or sole proprietor and operate under their SSN or ITIN provide their SSN or ITIN and name. They should not provide a business name or DBA name with their SSN or ITIN.
Contact Merchant Zoom today and we’ll consult with you on your best options.
Headquartered in Pinole California, MerchantZoom, Inc. was founded by Wally Arakozie. Previously employed by one of the largest merchant processing companies here in California for nearly a decade. Since the company’s beginnings MerchantZoom, has grown into a reputable national merchant provider. Along with delivering state of the art technology and competitive rates, MerchantZoom, thrives on personalized local customer service and support. In order for your business to ZOOM!
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Content Release Date April 3, 2017 – MerchantZoom Inc.
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