Backup withholding is finally upon us and merchants who still have not submitted proper documentation to fix a TIN (Federal Tax ID Number) mismatch will begin receiving notifications as early as this week. Merchants who do not have matching information on file with their credit card processing companies will be subject to IRS backup withholding, withheld funds are remitted to the IRS. Your processor will be unable to return any amount remitted to the IRS due to backup withholding. Merchants will need to seek assistance from a tax professional for help in recovering amounts withheld by the IRS.
While the way this goverment mandate is handled varies from processor to processor, we would like to suggest that you confirm that you are not in harm's way, by contacting them to confirm that your Federal Tax ID number & Business Name is accurate and has not been listed as a mismatch. You can also check your monthly merchant statement as we often see these types of notices being added to the information section of the monthly merchant statements.
Merchants who do not have a valid Tax Filing Name and Tax Identification Number (TIN) on file with their credit card processing company, are subject to backup withholding, a minimum of 28% of their gross sales, as mandated by IRS 6050W. Some states may impose their own penalty; currently known states include CA (7%), ME (5%), and VT (7.56%).
At Total Merchant Concepts, we have been proactively reaching out to our merchants who have a TIN mismatch in an effort to prevent any intrusion into their merchant processing funds. If you currently hold an account with TMC and have any questions regarding your TIN status, please feel free to contact us for confirmation of your status!