Merchant Accounts To Pass Info To IRS
A recently passed U.S. tax provision requires that starting in January 2011, all credit card merchant account providers must report your annual gross credit card transaction information to the IRS.
For you online entrepreneurs this was included in the recent Housing and Economic Recovery Act of 2008 . The provision was included under “Revenue Offsets” for the $300 billion dollar bill.
Who’s this going to affect the most? Small online merchants and sellers on eBay that process orders through banks and places like PayPal, 2Checkout, etc. and don’t declare it as income.
Now, I have always recommend that you, as a small business, set up the proper accounting procedures with a separate bank account and legal tax structure (LLC, Subchapter S, etc.).
If, however, you’ve been conducting business ‘on the fly’ as it were, those days appear to be coming to an end.
There are at present provisions to exclude accounts selling less than 200 orders or $20,000 annually.
Another provision is the information is based on the merchant’s Taxpayer Identification Number (TIN). If you don’t provide a TIN the merchant account holder is required to withhold 28% of the transaction and turn it over to the IRS, similar to income tax withholding.
