Form 1099-K Reporting Requirements for Payment Settlement Entities
If you act on your own behalf, issuing instructions to transfer funds to a payee's account, or if you act as a contractual third party and issue instructions to transfer funds to a participating payee's account to settle a reportable payment transaction, then the IRS wants your number.
Beginning in 2012, payment settlement entities (PSEs) must file a Form 1099-K, Merchant Card and Third Party Network Payments, to report aggregate gross receipts of all payment card and third-party network transactions made in settlement of payments made with credit cards, debit cards, gift cards, and credits. To be reportable, a transaction must be made within a network of unrelated persons or merchants who agree to the terms and conditions outlined in the regulations. These new reporting requirements apply to all payment card transactions but to only those third-party network transactions that exceed $20,000 in gross payments to a single payee and that exceed 200 transactions with that payee.
Like a shopper eyeing a great sale, you must act quickly. Copy A of each Form 1099-K is due to the IRS by February 28, 2012, if filed through the mail and by April 2, 2012, if filed online. Copy B was due to the payee by January 31.
Filing Form 1099-K can be confusing. You must identify each payee by name, address, and federal tax identification number; report both the gross dollar amount for the total reportable card/third-party network payment transactions for the calendar year and the monthly amount; and assign four-digit Merchant Category Codes (MCC) for each payee, with the possibility of filing multiple Forms 1099-K for recipients with receipts classified under more than one MCC.
To help PSEs transition to the new requirements, the IRS has granted temporary relief for any entities reporting inaccurate data on their Forms 1099-K filed in 2012. However, entities guilty of filing inaccurate data on their forms in 2013 will be responsible for paying the penalties.
Phishing scam targets taxpayers who use tax software
The growing popularity of tax preparation software has led to a rise in e-mail scams targeted at do-it-yourself taxpayers. Intuit, parent of TurboTax and numerous other tax preparation products, has seen a "marked increase" this year in reports of fraudulent e-mails that claim to come from it , says spokeswoman Julie Miller. Recent examples of bogus e-mails claiming to come from Intuit included one with "Your Intuit.com order confirmation" in the subject line. Another subject line read: "QuickBooks Security Notice."
In addition to stealing financial info, some of these phishing e-mails contain fake Web links that could download viruses.
Reasons identity thieves target tax software providers:
•Volume. Spammers who send mass e-mails have a good chance of hitting a large number of tax software users. More than 24 million taxpayers used TurboTax last year; more than 50 million purchased some kind of Intuit product, Miller says.
•Confusion. TurboTax, H&R Block and other software providers routinely send customers e-mails advising them of the status of their tax returns.
For that reason, customers often feel they can't afford to ignore what appears to be an e-mail from their software provider, Miller says. Legitimate TurboTax e-mails never ask for personal financial information, Miller says. Likewise, H&R Block never sends customers messages asking them to provide, update or confirm sensitive data, says spokesman Gene King.
Identity theft and phishing were the top items on the IRS' "Dirty Dozen" tax scams for 2012.
Crooks are increasingly using stolen financial information to file tax returns and claim fraudulent refunds, the IRS says.
How to avoid falling prey:
•Never reply to unsolicited e-mail. Don't open attachments.
•Don't respond to e-mails requesting your password, log-on, or any financial information.
•Don't respond to e-mails that claim to offer a "software update" or "software download." Updates should be done on your provider's website or desktop product.
By Sandra Block, USA TODAY
NEWSWORTHY NOTES: Our business is expanding! In response to client feedback and our tremendous growth, we have added a financial planning expert to our staff to better serve your needs. Please call to set up an appointment to review your Life insurance, Long Term Care insurance, Disability Income Insurance and Retirement Planning needs today!
Don’t forget to check out the various resources and helpful items on our website