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New IRS Taxpayer Identification Number Validation Fees for Business Owners from First Data and Other Processors in the USA

July 1, 2011

Important IRS requirements for 2011

The federal Housing Assistance Tax Act of 2008 included the enactment of Section 6050W of the Internal Revenue Code (Section 6050W) that requires reporting entities to annually report payments in settlement of card and payment third party network transactions to the IRS for all merchants.

Section 6050W also requires reporting entities to perform backup withholding from merchant funding by deducting and withholding income tax (currently 28%) from the gross sales amount of reportable transactions if (a) the merchant fails to provide the merchant's TIN to the reporting entity, or (b) the IRS notifies the reporting entity that the TIN (when matched with the name) is incorrect.  Merchants subject to Federal income tax backup withholding may also be subject to backup withholding for specific states as applicable. To avoid backup withholding, beginning in January 2012, it is very important that merchants provide the correct name and TIN that is used when filing their tax return that includes the transactions for their business.

To comply with this new law your payment processor must have your correct taxpayer ID number (TIN) and tax filing name for additional details regarding this reporting and validation of your tax information.

Merchant Impact:

We are releasing a statement message to initiate the fees for all existing merchants on the June & July 2011 month end statements:

 Effective July 1, 2011 merchants will be charged a Regulatory Product Fee in the amount of $4.95 per month. This fee will help address administrative and other costs associated with processes and procedures related to various governmental regulatory requirements.

 Effective July 1, 2011 merchants will be charged a TIN/TFN Blank or Invalid Fee in the amount of $11.95 per month, as applicable. This fee will be charged every month until we receive your valid TIN-TFN for your merchant account with us.

1) REGULATORY PRODUCT FEE BUNDLE AND RELATED FEES

First Data is pleased to announce its Regulatory Product Bundle, which provides (for a fee) a bundled single source solution to help manage and support the various IRS regulations related to reporting and also changes associated with the proposed Durbin Amendment. Services within the Regulatory Product Fee include those bulleted below. Please note that services are subject to change.

PHASE 1

TIN/TFN validation merchant notification/solicitation:  Any missing or un-matched TIN/TFN combinations must be corrected and re-validated to avoid withholding beginning January 2012.

  • Creation of files containing merchant information for TIN validation with the IRS
  • Reporting for portfolio monitoring of TIN validation statuses
  • Website and Interactive Voice Response (IVR) for Merchants to make TIN correction and certification
  • 1st  & 2nd mailing solution for merchant initiated TIN updates (fees such as customer service calls and postage continue to be a pass-through cost)

PHASE 2

1099-K Reporting: At the end of each calendar year the Obligated Reporting Entity (ORE) must file an information return with the IRS reporting the gross sales amount of each merchant’s transactions and must provide a corresponding form 1099-K to the Merchant by January 31st  beginning in 2012 and each year following.

  • Inclusion of reported gross sales amounts on monthly merchant statements
  • Collect and store reportable transactions with appropriate payee/payor information
  • Annual 1099-K generation/mailing and electronic information return filing with IRS

PHASE 3

Backup Withholding:  Beginning January 1, 2012 gross sales amounts reported under Section 6050W are subject to backup withholding for merchants with missing TINs.  In addition, back up withholding may be required after receipt of a CP2100 notice from the IRS if a complete W -9 is not received from the merchant within 30 days. The current Federal withholding rate is 28% and will be deducted from the Merchants normal funding based on IRS requirements.  In addition to the IRS requirements, some States are also requiring withholding for Merchants subject to Federal withholding.

  • Backup withholding of merchant funds for missing/invalid TIN
  • Automated processing of missing/ invalid TIN notices from IRS (Notice CP2100)
  • Creation and distribution of B notices to merchants
  • Backup withholding of merchant funds for unresolved notices
  • Management of W-9 receipt and imaging to discontinue backup withholding
  • Daily calculation of withholding amounts
  • Inventory management for outstanding withholding amounts
  • Tracking of amounts withheld by MID (merchant outlet)
  • Calculate/automatic backup withholding deposits
  • Submit withheld funds to IRS and State taxing authorities
  • Prepare and file forms to IRS and State taxing authorities

Durbin Amendment

The Dodd-Frank Wall Street Reform Act Section 1075 includes statutory provisions with broad impact to our industry.  Of greatest interest is the Durbin Amendment, which will regulate Debit Interchange and enable more control of routing PIN debit transactions to any payment network.  Although the final regulations have not been released by the Federal Reserve Board and timing delays present many unknowns, First Data has proactively begun development on debit-related solutions based on the proposed regulations, including: 

  • simplifying merchant billing by combining signature and PIN payment types into a single billing element
  • enabling enhanced control for lowest cost debit network routing

 Services include changes associated with the Durbin Amendment

 The billing for the Regulatory Product Bundle solution is based on the total number of merchants on all of our First Data platforms. Note: this fee will be applied to all of our merchants that are on file per merchant per month at a rate of $4.95 .

 Please note that a merchant/retail billing component will be available July 1, 2011, to charge merchants a fee related to this Regulatory Bundle offering.

2) TIN/TFN BLANK OR INVALID FINE PROGRAM STANDARDS AGREEMENT

To avoid backup withholding beginning in 2012, it is very important that merchants provide the correct tax filing name and TIN that is used when filing their tax return that includes the transactions for their business. Section 6050W requires reporting entities to perform backup withholding from merchant funding by deducting and withholding income tax (currently 28%) from the gross sales amount of reportable transactions if (a) the merchant fails to provide the merchant’s tax filing name and TIN to the reporting entity, or (b) the IRS notifies the reporting entity that the TIN when matched with the tax filing name is incorrect. Merchants subject to Federal income tax backup withholding may also be subject to backup withholding for specific states as applicable.

 Beginning January 1, 2012, the Program Standards will be amended and will include the imposition of a TIN/TFN Blank or Invalid Fine to clients for merchants in their portfolio who have missing or non matching TINs/TFNs. To assist clients with obtaining the proper information from their merchants before January 1, 2012 and to help avoid this fine, a retail billing component will be available July 1, 2011 to charge merchants a fee related to this issue. By releasing the retail billing component early, this may encourage merchants to provide the information needed to update their account before January 2012 withholding begins.

 The billing TIN/TFN Blank or Invalid Fine will be dependent on the number of merchants on file at $11.95 per month, per merchant.

These fees are specifically for First Data processors in the USA, all other processors such as Chase, Global may have lower or higher fees.  Check with your processors as soon as possible and read all ofyour statements from the credit card processors for help or information on avoiding the Invalid TIN/Blank TIN fees.

Getting  your TIN/TFN into your respective processors as soon as possible, may help you avoid unecessary fees above the required reporting bundle fee.  Your fees may be more or less, depending on your processor.  Call your processor today and make sure your merchant processing TIN/TFN are the same numbers your business uses when filing  the business' tax returns.   Ask  your processors what you can do to avoid or reduce the fees above.  Thanks for reading.  Please visit our website at www.freepospros.com and follow our blog or on Twitter FreePosPros

If any questions please email: keith@freepospros.com

"Helping merchants achieve their dreams!"  and "Free POS For All! from www.freepospros.com

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WHAT THE HELL DOES ALL THIS MEAN TO ME?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

Just another way for government to harrass small business

The IRS does not charge the fee. Shame on you for misleading people. And shame on people for being so ignorant. It's the merchant service providers who charge their customers the fees to cover the administrative costs. IRS clearly states that they cannot do it so. But who listens? Do some research before blaming the government. Type "TIN matching program fees are allowed?"



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