Two Years in Coming, an IRS Reporting Rule Takes Effect

Two Years in Coming, an IRS Reporting Rule Takes Effect
While the payment card industry is bracing for debit card interchange and other regulations that will come next year from the Federal Reserve as a result of the new financial-reform law, merchant acquirers on Monday got a long-anticipated reporting rule. Beginning with the 2011 tax year, acquirers must report how much their merchants generate in annual charge volume.

The new rules originated with the federal government’s concern about finding unreported or under-reported taxable business revenues (Digital Transactions News, June 25, 2008). Congress passed the enabling legislation, which amended the Internal Revenue Code, in July 2008 as part of the Housing Assistance Tax Act of 2008. Since then the U.S. Treasury Department and its Internal Revenue Service have been devising regulations to implement the law. Officials held a hearing in March, and the IRS published final rules Monday in the Federal Register.

The rules require settlement entities such as bank card merchant acquirers or payment card networks such as American Express Co. and Discover Financial Services that have direct relationships with merchants to file annual reports for each merchant listing that merchant’s monthly gross receipts from electronic payment transactions. Acquirers are to list the receipts, along with the merchant’s taxpayer identification number (TIN) and legal name, on a new form, Form 1099-K.