What is Section 6050W?
IRS Section 6050W was enacted by the Housing Assistance Tax Act of 2008 as a mandatory IRS reporting procedure for all payment settlement organizations. The new legislation went into effect January 1st, 2011 and was created by the IRS in an effort to assist with validation of merchant tax returns. At the onset of 2012 and each year thereafter, merchants will receive form 1099-K reporting their total gross sales of credit card transactions for the previous year.
How does 6050W affect me?
Section 6050W of the IRS Code requires reporting of all payment card and third party network transactions. Reporting entities will be required to file an annual information return with the IRS and provide all merchants with form 1099-K, reporting monthly and annual gross sales. To comply with this new law, it is critical that we have your correct taxpayer ID number (TIN) and business tax filing name. For additional details regarding this reporting and the validation of your tax information, contact CPN at 1.877.456.9747.
What happens if I do not provide the requested information?
As an IRS requirement, effective 2013, merchants who have not provided their correct and matching Tax Identification Number (TIN) will incur a 28% withholding tax, from their gross credit card sales, for the previous year (2011). The 28% withholding tax will then be submitted to the IRS. In addition, additional penalties may be levied by the IRS for merchants who fail to update their TIN and tax filing name with CPN. It is the merchant’s sole responsibility to furnish all required information to us to avoid backup withholding tax and/or penalties