The Housing and Economic Recovery Act of 2008 created a requirement for banks and other payment settlement entities (PSE) to report payment card and third-party network transactions for their merchants to the Internal Revenue Service (IRS). As part of the PSE’s reporting obligation, the PSE must collect and verify their merchant’s tax filing information, including legal name, address, and tax identification number (TIN). The PSE is also obligated to do “back-up” withholding of taxes (currently 24% from their merchant’s processing volume), unless their merchant certifies that the merchant is not subject to back-up withholding.
In order to comply with IRS requirements, a PSE, such as Yapstone is required to collect a valid Form W-9 from its merchant (you as property owner or property manager). The Form W-9 contains the merchant’s legal name, address, TIN, and a certification that the merchant is not subject to back-up withholding.
With the information collected on the Form W-9, Yapstone annually issues a Form 1099-K to you. As required by the IRS, an information copy of the Form 1099-K is sent to the IRS.
If you fail to provide your correct TIN or legal name or there is a discrepancy between the information you provided to Yapstone and the IRS’s records, the IRS may require Yapstone to begin backup withholding of your future settlements amounts.