IRS is now Collecting Revenue Data from your Credit Card Processor

As of Jan 1, 2011 The IRS is now requiring your credit card processor, including PayPal and the like, to report to them how much money you're receiving by accepting credit card, etc. payments they've processed for your business. The figure the IRS asked for is the gross, unadjusted amount, so if you processed $100 in gross receipts, that's the number they are going to send to the IRS, even if you had a $20 chargeback and $15 in fees. At the end of the year the processor will send you a 1099 showing you the total dollar amount that you received through them and that they reported to the IRS. It's up to you to account for your business properly in the USA so that the IRS doesn't just assume that that's your total revenue (without taking into account your processors fees or chargebacks, etc), that you're not declaring properly, and that they are just going to take 28% directly from your processor, since they don't trust you. So be sure to declare your USA company's income properly, the IRS will be comparing your revenue to your gross receipts reported on the 1099: your revenue had better be equal to or larger than what's on that 1099 or you haven't been accounting for your business properly.

Also, don't forget you have to issue 1099's to any US person (excluding corporations at the moment) you paid more than $600 to in the calendar year, by the end of January, then get them to the IRS before the end of February, regardless of when your fiscal year end is. So if you're going to pay someone more than $600 be sure to get a W9 showing their SSN from them so you can complete the 1099's. It can be very hard to get people to give you their SSN after you pay them, so be sure to get it right away, before you pay them.

The good news is that we know Tax Pros that can help you through all this red tape. Just as us and we'll put you in touch.