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Welcome to 6050W
6050W is your online Resource Guide about the new IRS 6050W rules and reporting requirements.
Starting in 2011 income received through credit and debit card transactions with all U.S. payment providers, including PayPal are mandated by the Internal Revenue Service to report sales information about some Internet merchants to the IRS. 6050W is applicable to online-merchants who get more than $20,000 in gross sales volume plus 200 payments or more online sales effective January 1 2011. Income received through credit and debit card transactions will be reported to the Internal Revenue Service which reporting starting in the year 2011.
Online merchants such as PayPal and others are be required to report to the IRS total payment volume received by online customers in the United States who meet the yearly reporting thresholds. The IRS changes will apply to all payment providers, including PayPal. That took effect on January 1, 2011, with the first reports scheduled to go to the IRS in early 2012. If you meet the requirements you need to verify your identity and make sure a valid SSN, TIN or EIN is assigned to your merchant payment account.
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We are on a mission to provide important online-information Regarding IRS 6050W and its reporting requirements to the Internal Revenue Service...
Banks and merchant services will report annual gross payments processed by credit cards and debit cards to the IRS and merchants.
Details of Credit Card and Merchant Payment Reporting
Banks and other payment settlement services will need to report gross annual receipts for each merchant. The income reporting will apply to "any transaction in which a credit or debit card is accepted as payment" (new Internal Revenue Code section 6050W(c)(2)). Thus, banks and other financial service providers will be reporting the total, gross amount of credit card and debit card payments for the year for each merchant.
Exceptions for De Minimis Payments by Third Party Settlement Organizations
The following exceptions to the new IRS rule 6050W are:
No report will be required if the merchant's total payment transactions for the year does not exceed $20,000
Businesses and New Credit Card Reporting 6050W
Small businesses will have to review their bookkeeping and accounting practices.
Business owners will need to reconcile the information reports submitted by the banks to their own books. Any discrepancies in reporting will need to be addressed so that accurate tax returns can be filed with the IRS. Further details regarding credit card and merchant account reporting are outlined in proposed regulations issued by the Internal Revenue Service ( REG-139255-08). Among other issues, the IRS details who is responsible for reporting, how gross amounts are calculated, and that merchant payment firms can be required to withhold funds for backup withholding. The IRS has also released a draft of the new Form 1099-K. Business owners and accountants should review this new form to familiarize themselves with the format.
Once bookkeeping issues become clear, the new law requires banks to report gross receipts. However, merchants often have charge backs, issue refunds, or have debit card transactions where the customer receives cash back. Under the proposed regulations, banks and other payment transaction services will be reporting only gross monthly and annual payments. Fees, charge backs, refunds and other items will not be netted against these gross amounts for IRS reporting purposes. Accordingly, businesses should have thorough accounting procedures to keep track of these items separately. In other words, if you are accustomed to recording only a net deposit from a merchant account, it would be wise to separate those net amounts into gross receipts and the associated fees and refunds. That way your internal financial reports can be more easily reconciled to this new Form known as 1099-K.
6050W Requires Merchant Identification
Financial institutions will have to report credit and debit card receipts to the IRS, merchants will need to provide their payment processor with the full legal name of the business, their address, and taxpayer identification number. For most businesses, this will be their Employer Identification Number (EIN). As such, payment processors will likely request businesses to provide them with a Form W-9 to obtain this information.
Merchants who don't provide their taxpayer identification information may possibly become subject to backup withholding at a rate of 28% on their payments. To prevent unwamted backup withholding, merchants should provide their credit card merchant service card payment service provider with the name, address, and business EIN.