IRS Reporting

The Housing Assistance Tax Act of 2008 included the enactment of Section 6050W of the Internal Revenue Code. This important new measure requires Obligated Reporting Entities (OREs) to report the gross amounts of their merchant customers’ payment card and third party network transactions to the Internal Revenue Service (IRS).

As a result, Data Genesis (and all acquirers) must verify merchants’ Tax Identification Number (TIN) [either the merchant’s Social Security Number (SSN) or their Employer Identification Number (EIN) and Tax Filing Name (TFN)]. Beginning in January 2012, OREs will send required reports to the IRS and distribute 1099-K forms to merchants.

This Act, along with the multitude of new regulatory obligations, continues to pose challenges within the Industry to meet the specified demands. The IRS considers a SSN/EIN (TIN) to be missing or obviously incorrect if it is not provided, has more or fewer than nine digits, is a repeating or sequential number (123456789) or has an alpha character as one of the nine characters.

Data Genesis is taking a proactive role in assisting our merchants to meet the requirements of the IRS validation and reporting by implementing the following critical solutions.

  • As new merchant accounts are approved, direct communication with the IRS eService takes place, providing a response as a match or mismatch.
  • Previously approved accounts were submitted to the IRS eService for validation of correct TIN/TFN, with subsequent reporting of match or mismatch.
  • Direct calling campaign to contact merchants with a mismatch to offer assistance with correction.
  • Mailing campaign for contacting merchants not reached via other methods.
  • Access to Website and Interactive Voice Response (IVR) for merchants to directly make any necessary corrections to SSN/EIN and/or TFN.
  • Annual 1099-K generation directly to merchants.

According to Section 6050W of the IRS requirements, if a merchant fails to provide a correct SSN/EIN (TIN) the ORE must begin Backup Withholding (BUW) from the merchant’s funding by deducting and withholding income tax from reportable transactions in 2013.

To learn more about updates to the enactment, go to Use the search feature at the top right of the page and enter “6050W”.