The 28% You Don’t Want – New IRS TIN Matching Regulation
If your merchant service provider (MSP) doesn’t have your proper business information on file, you could be in for a world of hurt. As per Section 6050W of the Housing Assistance Tax Act of 2008, all electronic payment transactions have been reported to the IRS since January 1st of last year. In order to ensure this reporting is accurate, certain business data must match the data on file with the IRS, such as:
- Your Taxpayer Identification Number (TIN)
- Your Legal Business Name
- Your Legal Business Address
- Your Business Organization Type (e.g. Corporation, LLC, Partnership, Sole Prop., etc.)
MSPs are required to report gross revenue, so chargebacks and refunds are included. The official ruling states:
Section 6050W(a) provides that each payment settlement entity must report the gross amount of reportable payment transactions for each participating payee. The proposed regulations defined gross amount as the total dollar amount of aggregate reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.
And if your tax information doesn’t match, the IRS will withhold 28% of all your payments starting on January 1st, 2013, whether it’s your fault or not. Once that happens, your MSP can’t refund you and all issues must then be handled with the IRS directly. If you haven’t received any kind of alarming notice that your information doesn’t match, this warning doesn’t apply to you. Although, it can’t hurt to call your account representative to confirm that all information is up to date and verified. Better safe than sorry.
If you didn’t know about this law, now is a good time to read up on the dense technicalities of it in this 520 page document.Last modified: January 21, 2012
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.