Business Owners, Do You Accept Credit Cards? What's Coming in 2011
Does your business accept credit cards? be prepared, beginning in 2011, merchant processors that process credit cards, debit cards and third party network transactions will be required to issue their clients a 1099. A 1099 will be required when the number of transactions processed for their merchant client, exceed 200 in a calendar year or when they process more than $20,000 in gross revenue for that client.
This the text from the IRS news release regarding this new provision.
The provision was enacted as part of the Housing Tax Act of 2008 and is dedicated to improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete.
The IRS commissioner in the same news release issued the following statement.
Time and again, we have seen that better information reporting helps the tax system work better by ensuring everyone pays what they owe. The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program.
Businesses most affected by this new requirement are the ones whose customers use credit cards frequently such as, on-line sales, restaurants, retail stores, gas stations, doctors and dentists offices that accept payments via credit cards, etc.
The first 1099s that will be required to be issued will be in 2012 (by January 31, 2012) for credit card transactions for the year 2011 year ending. Here is a sample draft of the 1099-K from the IRS website.
All of these new reporting requirements make it more important for you, as a business owner, to stay current and be accurate with your bookkeeping records and reporting requirements. otherwise you may find yourself in the IRS crosshairs. Not a place you want to be.