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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4488
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I did not separate out my merchant card income from overall

Resolved Question:

I did not separate out my merchant card income from overall income
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

That SHOULD be OK because Credit card payments will be reported by the merchant service using Form 1099-K with copies sent to the business and to the IRS.

Lane :

Banks and other payment settlement services will need to report gross annual receipts for each merchant. The income reporting will apply to "any transaction in which a payment card is accepted as payment" (new Internal Revenue Code section 6050W(c)(2)). Thus, banks and other financial service providers will be reporting the total, gross amount of credit card and debit card payments for the year for each merchant.

Customer:

The IRS sent me a CP2000 saying I didn't claim all my income. They made reference to merchant accounts. We claimed all of our deposits but forgot to separate them. Not sure how to respond to them.

Lane :

DId you get the 1099K?

Lane :

That should allow you to break it out

Customer:

Not that I can recall. This is from 2011.

Customer:

The first year the IRS changed merchant reporting requirements...so I thought maybe we did something wrong?

Lane :

Here's the IRS guidance: (I'll give you the link) but I think the answer is in asking for a copy of the 1099K from them so that you can be "compliant"

Lane :
Like Print

General FAQs on Payment Card and Third Party Network Transactions

I received Form 1099-K. How do I report it on my tax return?


Separate reporting of these transactions is not required. However, you should follow the return instructions on the form you are completing to report your gross receipts or sales. You should report items that qualify as a trade or business expense on the appropriate line item of Schedules C, E, and F.


What is a participating payee?


A participating payee is:



  • Any person who accepts a payment card as payment, or

  • Any person who accepts payment made by a third party settlement organization on behalf of the purchaser or customer.


Why is this reporting necessary?


This reporting is required by law. Third party information reporting has been shown to increase voluntary tax compliance, and improve collections and assessments within IRS.


How are reportable transactions to be reported to IRS?


Gross payment card and third party network transaction amounts are reported on the Form 1099-K,Payment Card and Third Party Network Transactions

Lane :

Your card provider can also provide a copy... I just saw where Stipe makes it available for download ofr allmerchants

Customer:

Ok, thank you for making this a little clearer. Tomorrow, I will ask my merchant processing company for a copy of the 1099K for 2011. Thank you.

Lane :

You're very welcome ... jus to throw a couple out there... here's AMEX:


Form 1099-K and IRC Section 6050W - American Express

Customer:

Should I complete an amendment to fix this, or just write an explanation of the discrepancy?

Lane :

Hope this provides some context

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

You can write an explanation to the address onthe notice

Lane :

or even call there should be a number on the notice

Customer:

Ok thank you! XXXXX wont be back....but the IRS is being nice and that scares me:/

Lane :

filing an amendment would certainly be the complete fix, but may be more than neccessary

Customer:

ok thanks.

Lane :

I think the politics recently may have helpoed that a little.... right now may be an excellent time to be proactive

Lane :

Good luck, just drive it and you'll be fine

Customer:

Yes, I completely agree!

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4488
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 6 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.


Thanks so much Becki,

Let me know if I can help further,

Lane

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Lane
Lane
JD, MBA, CFP, CRPS
3627 Satisfied Customers
Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986