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Federal Housing Assistance Tax Act Section 6050 W
(IRS Reporting)
In January 2011, the IRS enacted section 6050W, an amendment to the Federal Housing Assistance Tax Act of 2008. This IRS mandate requires all merchant service providers to validate the legal name and Tax Identification Number (TIN) for every merchant in their portfolio, and report to the IRS all annual revenues associated with these accounts.
To comply with this government mandate, Blue Jay Payment Systems is required to:
- Submit to the IRS the legal business names and tax ID numbers for all of our merchants, and ensure that these records match those in the IRS database.
- File a return with the IRS no later than January 2012, and annually thereafter.
- Provide all merchants who accept electronic payments an annual 1099-K form reporting their monthly and annual gross sales income during the previous calendar year.
- Withhold income tax (currently 28%) from the gross sales amounts of merchants whose TIN records do not match IRS records by filing date, January 2012.
- After careful review and analysis,Blue Jay Payment Systems has created a Regulatory Program designed to meet and exceed these requirements, ensuring that our valued customers remain compliant and free from unnecessary withholding while, at the same time, requiring the least possible demands on your busy schedules.
The components of this program are as follows:
- TIN Matching.
- Blue Jay Payment Systems will submit to the IRS the legal business names and tax ID numbers (TINs) of all our merchants annually.
- Merchants with unmatched records will receive notification from Blue Jay Payment Systems notice a with instructions for correcting the missing or mismatched information, and a timeframe to correct/update this information to avoid penalty fines.
- As merchants update and correct unmatched TIN information, Blue Jay Payment Systems will continually submit this information to the IRS until the correct information is validated.
- IRS Reporting.
- In January 2012, and annually thereafter, Blue Jay payment Sytems will file an annual return with the IRS reporting all payments in settlement of Visa/MasterCard/Discover cards and third party network transactions.
- Form 1099-K to be send to all merchants who have accepted electronic payments in 2011. This form will report all monthly and annual gross sales income based on the 2011 calendar year.
- Withholding.
- Beginning January 2012, all merchant funding will be subject to 28% backup withholding if merchant’s legal name or Tax ID number does not match IRS records. Merchants may also be subject to State tax withholding.
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Blue Jay Payment Systems has no control over the withheld fund. Merchant must file appropriate tax return with IRS and state tax offices for refund of such funds.
Understanding the Durbin Amendment
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform & Consumer Protection Act. Section 1075 of the Act, also known as the Durbin Amendment, requires the Federal Reserve Board (FRB) to implement regulations relating to debit interchange, debit networks, and merchant routing and acceptance of debit transactions.
In short, the so-called Durbin Amendment has three components:
- It requires the Federal Reserve Board to cap debit swipe fees. The Fed would determine the true cost of fraud prevention, and limit interchange fees accordingly.
- It exempts issuers with less than $10 billion in assets.
- It requires issuers to offer at least two unaffiliated networks over which electronic debit transactions may be processed.
The Federal Reserve Board issued regulations in final form on Wednesday, June 29. These regulations cap network debit transactions charges at 21 cents per swipe, plus 0.05 percent of the transaction, with the possibility of an additional cent if issuing banks comply with fraud prevention procedures.
To assist payment card networks in determining which of the issuers are subject to the debit card interchange fee standards and which are exempt, the FRB plans to publish annual lists of institutions that are above and below the small issuer exemption asset threshold of $10 billion. Those institutions are expected to hold interchange at current levels.
Lastly, the FRB set an implementation date of October 1st. On that date, card networks must honor the 21-cent cap and allow debit cards to be processed on at least two independent networks. (The effective date for the network exclusivity prohibition for issuers is April 1, 2012).
To correct missing or unmatched Tax ID information, contact Blue Jay Payment Systems Customer Service at 1-800-889-8765.
Payment Card Industry (PCI)
Every customers want assurance that their credit card account information are safe when they shop in business establishments. Offering your customers a safe and secure way to pay is more than just a good business practice it's a requirement. Every merchant who touches credit card account information is responsible for safeguarding that information and can be held liable for security compromises if they have not taken the required precautions.
Blue Jay Payment Systems values the business relationships merchant we severed. And we take data security matters very seriously. We are committed to bring all our merchants in compliance with Payment Card Industry (PCI) Data Security Standard (DSS).
For more information Payment Card Industry (PCI) Data Security Standard (DSS), please visit www.pcisecuritystandards.org.