Get Ready for Merchant Card Reporting
If you’re an eBay Seller, you’ve probably already heard the buzz about the new Pay Pal reporting starting January 2011.
There’s a lot of facts, half truths and downright wrong items floating around the Internet these days. Here’s what is really going on.
Starting January 2011 all 3rd payer groups will start reporting transactions. That means if you sell something and take Master Card, Visa, Pay Pal, American Express or any other form of 3rd party collection-type card, you’re on the list to get a Form 1099-K in 2012.
There is a group that will be exempted. If you have:
- Less than 200 transactions in the year or
- Make less than $20,000 gross in the year,
the IRS considers this ‘de minimus’ and does not require the companies to report.
I’m skeptical that the first batch of these will be right. And if you happen to get a form with the wrong amount, it’ll be up to you to report to the IRS how much it should have been.
Here are some things you need to do if you accept credit cards or Pay Pal in your business:
- Track income in accounting software,
- Regularly reconcile your merchant account with your reported sales,
- Consider setting up two bank accounts for your business: one for merchant sales only and one for your regular checking account activities, (You can then transfer money from the merchant account to your checking account. This little trick will make it much easier to reconcile.)
- Be prepared to give your TIN (taxpayer ID number) to your provider.
This is just the beginning of a lot more reporting that starts in 2011. Get ready with good bookkeeping now!