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Independent sales organizations may have some clean-up work to complete before the Internal Revenue Service issues its regulations about how acquirers should report merchant card payments. A bank or other organization that pays merchants settlements for their card transactions will have to begin reporting those payments beginning Jan. 1, 2011. To do so, however, the IRS likely will require entities reporting this data to include a merchant's legal name, Paula D. Porpilia, principal at TIN Compliance Consultants, a Berkeley Springs, W.Va.-based firm, said at last month's Midwest Acquirers Association conference in Lombard, Ill. That means acquirers, or whichever entity has to report the data to the IRS, will have to check account details of existing merchant portfolios to verify the merchant's legal name and not its "doing business as" name, she said. The legal name must match IRS records for the business. Though an ISO may not pay the settlement amounts, it may still have to clean up its existing portfolio to ensure the reporting organization has the correct information. The IRS could assess penalties for not having the proper legal name, Porpilia said. It also could assess a backup-withholding amount if the legal names do not match. That could be as much as 28% of the total, which the reporting organization must pay even if the amount cannot be collected from the merchant, Porpilia said. The key is having good data in one's merchant portfolio, she said. The IRS is working on the regulations for how to report this data, but when it will release them is unknown. The IRS has said the measure could generate $10 billion in additional taxes over the next 10 years from small-business revenues that may be going uncollected (CardLine, 2/10).
