Requirements of IRS Section 6050W for Business Owners
Merchant Tax Return Validation and TIN Matching
On January 1, 2013, requirements in the Housing Assistance Tax of 2008, which have been delayed for several years, became active. These requirements mean that business owners need to verify their business entity name and taxpayer identification number (either an employer identification number or social security number) and ensure that it matches what is on file with the IRS. If there is a mismatch, normally your credit card processing company will send you a notice. One of the problems with TIN validation and matching is that often a small difference in the entity name (like a misplaced period) could be grounds for a mismatch. The goal for 6050W is to ensure that the 1099K form that you get will match up with the information your bank or merchant services provider has on file as well as what the IRS has in its system. In the year 2013, people have started noticing issues with backup withholding even if they had offshore merchant accounts and other entities that did not necessarily process a majority of US credit cards. Some international processors were caught off guard, and their clients are now very angry or have switched. Naturally, processing companies have also gotten on board and found a new fee they can charge which gets written off to compliance.
Notes and Special Information
Special note: Compliance with this requirement is essential given the 28% backup withholding on all monies run through your credit card machine.
Latest news:
September 19, 2013:
Business searches for 6050w and Tin Validation terms increase as nervous business owners seek to verify data.
Foreign Withholding:
People with merchant accounts in foreign countries are seeing circumstances like 28% withholding on US credit cards and wondering why they need to validate if they do not primarily do business in US.
