News: IRS to require greater credit card reporting information

[Anonymous]

I'm reading through my CCH tax update here and saw something some of you may be interested in.

Starting in 2011 the IRS is going to start requiring credit card processors to report merchant activity to them. This is in an attempt to increase compliance rates by verifying receipts and fees from credit/debit transactions to what the merchant reports on their tax returns. This will not apply to those who have under $20k in gross receipts or 200 transactions per year. The processor will have to supply the IRS with the merchant TIN. If the reporting party cannot provide this, then 28% of the payment will be subject to backup withholding.

This could have implications with the merchant since the costs of compliance on the processor side will probably push down in terms of increased fees, making Credit and Debit transactions more expensive.

[MidnightVoice]

http://ficoforums.myfico.com/fico/board/message?board.id=creditnews&thread.id=2197&jump=true

Message Edited by MidnightVoice on 08-06-2008 05:10 PM

[Anonymous]

True, but remember, merchants can NOT pass that "cost" on to consumers specifically using CCs in purchasing.

If they raise their prices, it has to be for EVERYONE, cash, check or charge. They cannot charge you, a CC user, more for the transaction simply because you're using a CC.

[Anonymous]

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@MidnightVoice wrote:

http://ficoforums.myfico.com/fico/board/message?board.id=creditnews&thread.id=2197&jump=true

Message Edited by MidnightVoice on 08-06-2008 05:10 PM

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The user in that post seemed to be talking about the individual level. So, that either means that the original poster in that thread either misinterpreted the article, the article misinterpreted the law or the article is talking about a completely different law.

The aim with this is purely business related. A lot of S-Corps and LLC's are cash basis operations, which means that you don't recognize revenue for tax purposes until cash is received.

Since you have a third party (the credit card processor) just acting as an intermediary handling the cash transfer and not the sale itself, there is room for a dishonest merchant to skim some cash off the top and record less than what was sold.

[Anonymous]

I would say that 85% of the merchants here charge a fee ranging from .35 to .90 for a consumer using a credit/debit card.

[Anonymous]

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@Anonymous wrote:

I would say that 85% of the merchants here charge a fee ranging from .35 to .90 for a consumer using a credit/debit card.

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AFAIK, most states don't allow that. I do remember, when I set up the ability to accept CCs, that I was specifically told by my merchant processing company that it was illegal to do so. That if it were a choice between charging someone for using a CC and just not accepting CCs, to choose not accepting them.

In fact, in looking over my VISA, MC and AmEx (can't get a card with them, but I CAN accept them!!), charging my clients a fee to use their CC violates my agreement with VISA, MC and AmEx. It even states that if I do charge them a fee or surcharge, I WILL lose my account with them.

However, it does state that I CAN give a discount for cash. I just can't "penalize" them for using plastic.

Now, while there's no Federal law against it (there WAS one, but it expired years ago), like I said above, most states forbid it. I know mine does!!