The IRS issued proposed regulations today under the new Housing Assistance Tax Act of 2008 that, starting in 2011, banks and third party settlement organizations must report the gross amount of payment card and third-party network transactions each year to participating merchants and the IRS.
The provision is designed to improve voluntary tax compliance by businesses and help the IRS verify whether their tax returns are accurate.
"Time and time again, we have seen that better information reporting helps the tax system work better by ensuring that everyone pays what they owe," said IRS Commissioner Doug Shulman. "The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program."
The IRS has created a draft of the Form 1099-K that payment settlement entities will use to report the gross amount of merchant card or third-party payments.
See also: IRS Newswire, "IRS Issues Proposed Regulations on Reporting Requirement for Payment Card and Third-Party Payment Transactions," IR-2009-106, November 23, 2009
Posted by Marc Patterson, Associate Editor, Wealth Strategies Journal.
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