You’d better not cry…. You’d better not pout I’m telling you why. The IRS is coming to town….
And if you don’t pay attention to what I’m about to say, they may just withhold 28% of your credit card transactions. For some businesses this could mean coal in their stockings or closing their doors altogether.
This witch hunt involves a new IRS requirement that credit card processors report all of their merchants’ credit card transactions on 1099K forms in an effort to stop business owners from reporting inaccurate credit card sales to avoid paying income tax.
Beginning Jan. 1, the IRS is requiring acquirers (credit card processors) to withhold 28% of credit card transaction volume from businesses whose Tax Identification Number (TIN) and legal name on file does not match the information the IRS has on file from the businesses tax return. The IRS began their hunt years ago and postponed the enforcement date in October 2011 in response to complaints about 1099K form inadequacies and implementing a new federal law.
Here’s the thing, at this point credit card processors are carrying the burden of checking their merchant’s information. If you happen to be a business with mismatched information, it is your processor’s responsibility to withhold the money in the name of the IRS, otherwise they have to cough it up themselves. And that’s not going to happen.
Because the IRS is paying such close attention these days, Merchant Connect, the online statement and reporting solution provided by credit card processor Elavon has added a new Settlement Reconciliation Service (SRS) feature. SRS helps businesses reconcile the reportable gross sales settled through Elavon. This includes credit, debit, and gift card transaction activity reported on their monthly statements.
In laymen’s terms, this tool tells you exactly what your credit card revenue is after fees, refunds etc… It also tells you exactly what Elavon is reporting to the IRS so you can make sure your information matches up and you are not over reporting total sales and possibly owing more taxes. Are you seeing a trend here?
What would it mean for your business to lose 28% of all of its credit card transactions? I can’t imagine it would be good. So, please, double check with your processor that you’re federal tax ID, legal name and address match the information you have filed with the IRS. And if you are starting a new business, be extra meticulous about your paper work and ensure all the information matches up.
The IRS is not messing around, and we don’t want to be the ones to tell you that you just lost 28% of your revenue.