IRS Requires Merchant Service

The IRS recently instituted a policy, to take effect January 1, 2011, that will require certain ISO's, acquiring banks, processors and third-party payment providers to keep track of merchants' gross credit card, debit card and third-party payment receipts.
Payment settlement entities, which are service providers that make direct payments to merchants for their alternative payment, credit and debit card transactions, and third party payers, such as PayPal, that do not use conventional payment channels will now have to fill out a 1099-K form in addition to the one the company already turns in for traditional credit and debit card purchases. Merchants must also report this income on their business tax returns as well.
The Green Sheet's contributor Adam Atlas recently predicted that acquiring banks will begin requesting copies of 1099-K filings as part of the underwriting process for new merchant accounts.
Merchants deciding who to choose as a merchant service provider should not use the information provided in the 1099-K form to oversimplify the search, writes Atlas. There are providers that might be more expensive on an aggregated annual basis, but they might settle funds faster, have a lower reserve requirement and provide equipment at a lower costs. Those factors will not be recorded on a 1099-K.