Credit bureau and data verification provider Equifax has developed a service to help payment processors meet merchant validation requirements for new tax reporting obligations that went into effect this year.
The Equifax Tax Identification Number Verification service allows processors to validate merchants’ tax ID information to ensure that the sales data gleaned from processors’ transaction records are reported to the Internal Revenue Service for the correct merchants.
Previously, merchants would report their income to the IRS unchecked. Under the new IRS policy, merchants’ reported business income can be validated against processors’ records of transaction volume. Requiring processors to report transaction data on their merchant customers is a verification process that mirrors employers’ reporting of employee wages.
“Consumer processes are starting to migrate and become business processes too,” says Jeff Knott, an Equifax senior director of product management in the Atlanta-based company’s verification services division.
“Our program is able to integrate directly with the IRS to validate the tax identification number that’s associated and registered with that business,” Knott says. “We run the information against the IRS database and get a match or no match result.”
Equifax’s service handles data including IRS Employer Identification numbers for businesses and Social Security numbers and IRS Individual tax Identification numbers for individuals that run small businesses and helps processors maintain compliance with the
The IRS now requires “payment settlement entities” to file 1099-K forms on all payments made in settlement of credit card transactions, as well as any other third-party network transactions where gross payments exceed $20,000 and there are more than 200 transactions for an individual merchant.
To meet compliance with the new requirement, Equifax is helping processors conduct audits of TIN data on their existing customers. When processors bring on new merchant clients, they can incorporate the Equifax validation as part of the application process.
In certain instances where processors can’t immediately validate merchants’ tax information, they are obligated to withhold taxes at an “extreme tax table,” until the verification is complete, Knott said. Validation services that integrate with the IRS make that process faster.
“They’re able to do it proactively at the point of application between the payment processor and the service they’re offering to the merchant,” he said.
While processors have the ability to work directly with the IRS, Knott said the Equifax service,
“In terms of being able to integrate this step into their existing processes, where we may also be pulling credit scores or IRS tax return copies, it makes it a convenient one-stop process,” Knott said. “The processor can focus on the service they provide to the client and let us focus on the diligence with the application.”
