The Internal Revenue Service has pulled back from a plan that would have required businesses to reconcile the total receipts they report on their business income tax forms with the amounts that third parties, such as credit card companies, report paying to merchants to settle merchant-card transactions.
The IRS announced its change of plans in Frequently Asked Questions posted on agency's website Feb. 10.
The NRA and other small business groups met with the IRS Feb. 6 to flag the business community's concerns with the way the IRS proposed implementing a 2008 law that steps up reporting requirements for third-party payers.
The IRS's original proposal would have required businesses that accept credit cards or other third-party payments -- such as from PayPal -- to reconcile the gross receipts they report on their tax returns with the totals that third-party payers report to them using a new 1099-K information-reporting form.
The IRS initially proposed requiring business taxpayers to use a new line on business tax returns to make sure their gross receipts line up with the gross receipts that third-party payers report paying to merchants.
The law originally required the third-party reporting to take effect for payments made after Dec. 31, 2011. After business groups said the proposed reconciliation mandate would create huge paperwork burdens for businesses, the IRS in October postponed the requirement by a year, and last week appeared to abandon it completely.
"There will be no reconciliation required on the 2012 Form 1099-K, nor do we intend to require reconciliation in future years," the IRS said in its FAQ posted Feb. 10.
Restaurants and other businesses will continue to receive the 1099-Ks from their third-party payers; the IRS only withdrew the reconciliation requirement.
To make sure the IRS doesn't try to resurrect the proposed mandate for reconciliation, several members of Congress have introduced bills to prevent the agency from moving ahead with the plan. Senate Finance Committee members John Thune (R-S.D.) and Maria Cantwell (D-Wash.) Feb. 10 introduced a Senate bill, after Reps. Aaron Schock (R-Ill.) and Bobby Schilling (R-Ill.) introduced the same bill in the House.
"The overreaching and unnecessary 1099K tax reporting requirement will create a paperwork nightmare for small businesses," Thune said.
