Tax News reports that the IRS has issued proposed regulations for the new reporting requirement for credit card transactions:
The provision was enacted as part of the Housing Assistance Tax Act of 2008 and is designed to improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete.
The regulations, which were issued on November 23, propose rules to implement the reporting of credit card, debit card and similar transactions, as well as transactions settled through third-party payment networks, such as third-party organizations that settle online transactions.
The new law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants. The IRS emphasized that individual cardholders are unaffected by this requirement, and none of the cardholder’s personal information will be shared with the IRS.
The IRS has created Form 1099-K, which is similar to the existing Forms 1099 used to report interest, dividends and other payments. The first information return covering calendar year 2011 must be filed with the IRS and furnished to participating merchants in early 2012.
Among other things, the proposed regulations describe who is required to file a return and which payment card and third-party network transactions are subject to the reporting requirement.
According to WebCPA, IRS Commissioner Doug Shulman says the new reporting requirements are needed to help the IRS close the tax gap:
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. 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 is inviting comment on the proposed regulations and proposed Form 1099-K. These must must be received by January 25, 2010.
A public hearing on the proposed regulations will be held on February 10, 2010, in Washington, D.C.
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1 Full Disclosure Part Deux: IRS to Require Millions of New 1099’s | Patriot Tax and Bookkeeping,Inc. // Jun 26, 2010 at 4:15 pm
[...] work better by ensuring that everyone pays what they owe,” IRS Commissioner Doug Shulman explained last year as his agency unveiled the 1099-K. “The new law gives us an important new tool for closing [...]
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