Thursday, November 27, 2008

Coming Soon: Merchants +Credits Cards=Millions of 1099s

Starting on 2011, credit card issuers will be required to report to the IRS the payments that merchants receive via credit and debit cards. Such payments will be reported on Form 1099 in conjunction with payee statements, which will therefore mandate reporting of that income by the merchant recipient.

This includes direct merchant transactions, as well as transactions such as those managed by PayPal and Bill Me Later, in addition to intermediary merchant-like entities such as EBay who have a hand in the transaction process. This is going to cause big headaches for card issuers when it goes into effect in three years, but no reporting will be necessary for merchants with under 200 payments per year or less than $20,000 in annual credit and debit card sales.

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