Merchant Accounts and Taxes

Though any income to your business will be reported and taxed through your standard tax return, merchant accounts and taxes require that you submit additional information to the IRS each year to ensure that your business can continue operating smoothly. Like most aspects of the tax code, this can be confusing for some business owners, and can cause some trouble if you fail to follow through properly. Rather than having to read through the IRS code yourself, here is some helpful information to ensure that you make the proper reports and avoid any IRS penalties.

When Did The Tax Procedure Start?

For those who have operated a business in the past using merchant services, you may be surprised to know that there are specific requirements and additional paperwork required for merchant account filings when it comes time for taxes. In 2011, the IRS changed its guidelines and now requires that every business utilizing merchant accounts submit a separate form with their taxes. This form is to report all of the income that runs through credit card processing.

What Do You Need for our Merchant Account and Taxes?

If you ever doubt the need for an accountant, spend some time going through the different IRS guidelines and see how much sense it makes to you. Unless you already have a background in accounting, you will find that IRS guidelines are extremely difficult to discern, and the part about merchant accounts and taxes is no different. 6050W of the IRS code outlines the requirements of tax reporting for merchant accounts.

For most companies using merchant accounts, you will receive a 1099-K form from the IRS to report your income. The two exceptions to this are companies that receive less than 200 credit card transactions or companies where transactions total less than $20,000. Of course, the income will still have to be reported, but you will not receive the 1099-K form.

When you do receive the form for your merchant accounts and taxes, it is important for you to fill everything out properly and make sure it is submitted so that everything is filed properly. If you do not receive this form in error, you can also download it form the IRS website. Along with this form, also make sure to include all of the necessary business information, including your company’s tax identification number and the information for your merchant service provider.

Reporting On Merchant Accounts

Should you company fail to properly report merchant accounts on the 1099-K form, there is a chance that your business will be subjected to backup withholdings in the future. If you do work with an accountant, talk with him or her about the details of this filing and make sure that it is never excluded from your tax filings. If you do inadvertently leave out and pertinent information, you will find that you could run into issues down the road with your tax filings. Make sure to report this properly so that you do not run into these issues.

If you have any questions about reporting your merchant accounts and taxes, please feel free to contact a representative at Transparent to find out more about your options.