Credit Card Payments Reported to IRS
Under new Code Section 6050W, a business client who accepts payment cards will receive annual statements from the banks or other organizations issuing the cards showing the gross amount of card payments made to the client. The bank or other organization will also have to report the payments to the IRS.
While the new payment card reporting requirement will not apply until 2011, a new notice from the IRS reveals some of the issues the IRS is grappling with in implementing the new rule. For example, while the law and committee reports make it clear that the new reporting rule will apply to both credit and debit cards as well as payment through third party networks such as PayPal, the IRS indicates that it is weighing how to interpret the exact definition and scope of "payment card."
The IRS is also considering whether the current Form 1099 should be used for credit card payment reporting and, if so, whether the timing of such reports should conform to the current information reporting schedule. In addition, the IRS will need to determine whether reportable payments should be reduced by discounts, fees, refunds or other amounts, as well as how to administer the system to avoid double reporting [Notice 2009-19].