The laws began to become legal in 2008, and in 2011 they were thrown to the public and enacted. As a merchant with a merchant account of any kind, when someone pays you for your services, the IRS wants a 1099k sent to them with the gross receipts of each card. The cardholder bank and merchant services are responsible for the 1099k. You need to make certain that you have wonderful records, because all they want is the gross receipts that you received. You will be notified of the amounts from each one.
With your records you need to be able to prove any charge-backs, any canceled purchases, etc. The gross amount is what’s given, you don’t always receive what was paid to you. Things go awry after a purchase with some of them, or adjustments are made. The IRS is not after that amount. They only want the gross amount, and that can be a nightmare for all concerned.
Bookkeeper nightmare
It’s hard enough running a business each day without a bookkeeping nightmare and with this law, Treasury Decision 9496- related to Internal Revenue Code Section 6050W, it makes things even harder. So, whoever is doing your books will need to cross reference each purchase and make sure that the whole history is there. From the moment the button is pushed and the card comes into play, to the end of the transaction, whether it’s done right then, or if it keeps returning because of issues. The whole story will need to be included somewhere in the files.
The IRS is only concerned with the gross story going on with the receipt and it doesn’t tell the whole enchilada. That purchase may have been altered and it may have been canceled. But, the IRS gets the gross purchase without the Cinderella ending. So, it’s up to the book keeper to make the job easier all the way to the end and get those reductions where they are needed.
When hair flies
Book keeping can be one tough job. When a business has 30 people with their hands in the cookie jar every day, each purchase has a different story. Trying to keep track of them all is a nightmare. So, get with your book keeper and organize a simple system that will work for everyone. Don’t make it too intricate and don’t leave out important information for things. It may take a few tries for everyone to get it right, but once the system is working smoothly, don’t change it. People generally hate change anyway, but they work with stealth like reflexes when they have a system they know and it all flows well.
Be prepared
Stay up to date with your IRS information and know this particular one well. It could drown you with issues come tax time. Just know that with each transaction you need to follow it from beginning to end and know the story behind it. Have good records so that if something should arise later on, you can find it in your files and take care of it. Good luck with the law, and the gross receipts from your merchant account, and the 1099k.
