As the IRS peels back the onion on the controversial Merchant Tax Reporting mandate that became effective in 2011, they continue to provide reporting relief to the merchant community. At the end of 2011 the IRS instructed merchants to simply enter zero on the tax form line associated with the gross sales from credit/debit card receipts. So although payment processors are still required to prepare and submit the new 1099-k forms for the 2011 tax year, merchants are not required to report those amounts on their 2011 tax returns. 

 

This directive provided temporary relief for 2011 reporting, but most merchants recognized the real compliance burden will be associated with reconciling their business sales with the amounts reported on the 1099-k forms in future years. The IRS has received numerous comments from merchants and industry associations regarding the hassle of attempting to reconcile the gross sales reported on the 1099-k with all of the adjustments necessary to account for net sales on tax forms - i.e. sales taxes collected, customer returns or chargebacks, tips, gift card sales, alternative payments, etc.

 

Responding to these concerns and the numerous inconsistencies in the reporting requirements, the IRS has now announced that merchants will not be required to reconcile the amounts reported on their 1099-k. This change is effective for 2012 reporting and all subsequent years.

 

As a result of this new ruling, merchants will report the 1099-k amount as a line item entry on their 2012 tax reporting, but will not be required to complete the onerous task of reconciling the gross receipts listed on the 1099-k to the sales and revenue amounts listed on their Form 1120 (or other tax forms).

 

Read more about this positive development at: http://digitaltransactions.net/news/story/3434

 

Let us know your experience with the new 1099-k reporting of credit/debit sales, and the impact it has on your tax preparation.