The Internal Revenue Service has provided transitional relief from penalties for a Section 6050W filer who reports incorrect taxpayer identification number information on Form 1099-K information returns and payee statements filed under Section 6050W of the Tax Code.
The relief provided by Notice 2013-56 is available for certain errors on information returns and payee statements required to be filed or furnished in 2013, based on payments made in calendar year 2012, as well as certain returns and statements that are required to be filed or furnished in 2014, based on payments made in calendar year 2013, provided that the section 6050W filer makes a good-faith effort to accurately file the appropriate information return and the accompanying payee statement.
In addition, the notice informs Section 6050W filers that IRS notices informing payors that payee name and TIN combinations are incorrect (CP2100/CP2100A Notices) will not be sent based on incorrect name and TIN combinations on Forms 1099-K due before Jan. 1, 2014. The first CP2100 and CP2100A Notices with respect to payments subject to section 6050W will be sent in late 2014 based on incorrect name and TIN combinations on Forms 1099-K filed in 2014 for calendar year 2013 payments.
The Housing Assistance Tax Act of 2008 added Section 6050W to the Tax Code, requiring credit and debit card companies and third-party payment aggregators to provide information returns listing payment card transactions. As a result of the requirements, merchants must provide their valid tax identification number and tax filing name. If a merchant fails to provide its TIN or if the IRS informs them that there is a discrepancy between the information furnished by the merchant and the IRS’s own records, the reporting entity will be required to withhold tax on the merchant’s future funding amounts.
The IRS recently provoked criticism from Congress after reports that it sent Notifications of Possible Income Underreporting to approximately 20,000 small businesses based on the information it had received on their payment card transactions. House Small Business Committee chairman Sam Graves, R-Mo., wrote a letter to the IRS expressing his concerns (see Congressman Presses IRS on Small Business Notices of Possible Income Underreporting).
Notice 2013-56 will be published in Internal Revenue Bulletin 2013-39 on Sept. 23, 2013.
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