1099-K: History and Hints

 

Section 6050W of the IRS tax code came with the Housing Assistance Act of 2008 (although it’s completely unrelated to housing) and introduced us to the 1099-K.

Known as the “Merchant Card and Third Party Network Payments” form, the 1099-K is an IRS effort to increase tax compliance and decrease the “tax gap,” or the difference between what people earn and what they actually report for taxes. It went into action during the 2012 tax season for 2011 income.

Payment settlement entities (PSEs), like us, are required to submit an annual 1099-K to the IRS showing, month by month, exactly how much each of our client merchants earned in electronic sales—credit, debit, stored-value cards and electronic funds transfers—over the fiscal year. PSEs also send the 1099-K to merchants (by January 31) so that they can use it to properly file their other tax forms. Before the dawn of the 1099-K, a lot of tax gaps were thought to come from small businesses accepting payments through platforms like eBay, Etsy, Amazon, ridesharing apps and other third-party sites.

Others also managed to fly under the radar with underreported, or completely unreported, sales. The 1099-K allows the IRS to tighten up the accuracy and enforcement of business taxes.

Businesses who bring in less than $20,000/year and have fewer than 200 transactions/year are exempt from the requirement and won’t receive a 1099-K.

1099-K Business Tips

Make sure you provide your payment processor with the correct Tax Identification Number (TIN), tax filing name and your legal name as the business owner. Also, be sure these match all of the information on your other tax documents. If you provide an incorrect TIN, the IRS may instate backup withholding—taking a hefty 24% of your future earnings until the federal income tax is met. If you do become subject to this backup withholding (you’ll receive what’s called a B Notice warning you of it), you can fix it by providing the correct TIN, amending your return, properly filing any returns that were missing, and paying the owed taxes. Avoid this (literally and figuratively) taxing process by double checking that your business information is up to date and consistent everywhere!

Provide your payment processor with the correct mailing address to ensure timely receipt of your 1099-K. This is particularly pertinent for ecommerce merchants who may not be tied to a physical location.

If you switched payment processors at some point during the year, be sure to include 1099-K reporting data from both of them. A business with multiple merchant accounts will need separate 1099-Ks for each. But any businesses, or branches of a business, with the same TIN use the same 1099-K.

During the year, avoid processing any personal expenses through your business’s electronic payment system. For example, say your friend owes you money and wants to pay you back with a credit card. It might be tempting to use your business’s payment terminal to take the payment. However, that money then becomes part of the 1099-K, and is taxable.

Your 1099-K shows your gross sales from electronic transactions, and does not include chargebacks or returns, so you’ll have to report adjustments under the Returns and Allowances section of your tax return. The IRS understands discrepancies between tax returns and 1099-Ks, particularly for entities like restaurants, as tips made with payment cards aren’t considered taxable income. But they will investigate large inconsistencies that seem suspicious by asking for more documentation to account for the differences, so it’s important to keep all of your transaction records handy.

1099-K requirements can either be a pain or a breeze you barely notice. To keep it the latter, the main things to remember are to keep your TIN up to date with your payment processor, file your taxes honestly, and, when in doubt, bring questions to your payment processor to avoid problems down the road. Source

Why Merchants Choose CyberSource Payment Gateway Processing

 

Choosing the right tools to drive your business is more complicated today than it was a few years ago. The rapid evolution of consumer trends has brought a variety of innovative business solutions to market. As the ways we do business change, investment decisions carry more weight. The success and growth of your business hinges on how efficiently you innovate.

Speed and convenience are now customer expectations, no longer distinguishing businesses with the fastest ordering processing times but rather those still moving at last year’s standard. Keeping up is one thing, but staying ahead of the many moving parts of today’s economy is another. Disrupting technology can quickly turn a lucrative investment into an expense by causing unforeseen integration issues, and staying on the leading edge of business technology is vital to your success.

Single Platform Management

Efficiency is paramount to drive business growth. CyberSource, a Visa solution, provides your business with powerful resources that are simple to manage from a single platform. Say goodbye to interconnected software and the intensive task of integrating different systems.

CyberSource’s broad array of tools come into play before and after you accept payments, from order screening and fraud management through to payment processing, customer information management, and advanced reporting. To simplify reconciliation or forecast, consolidate all of your transaction reporting, or isolate it by category such as processor, payment type, geography—you be the judge.

Streamline Payments

Consumers value the convenience of paying how they want to. Whether that’s face-to-face, in-app, on your website, or over the phone, CyberSource enables a single view of customer activity across all channels. No need to funnel customers to the payment method that’s most efficient for you, as all transactions are equally easy to manage on the same platform.

Prebuilt integrations allow you to plug and play right out of the gate. Easily connect platforms such as Shopify, WooCommerce, Magento and dozens of others, as well as CRM, ERP, and other business systems. Broad compatibility with your back-end systems and other apps allows you to enhance, rather than replace, systems you have or want to have in place.

Customizable, Global Reach

CyberSource allows you to create your own checkout workflow and design, creating an experience that reflects your brand. Accept payments in 40 currencies, from over 190 countries and territories with CyberSource’s language templates to ensure every customer can easily interact with your business.

In addition to universal cards, CyberSource supports regional cards and local payment types. Payment options may be added or removed at any time. If you have global partnerships or international customers, you should never have to request an alternative transaction method for B2B and B2C transactions.

• Universal card types including Visa, MasterCard, American Express, Diners, Discover, and JCB
• Regional cards include Maestro, Carte Bancaire, CartaSi, Aura, Hipercard, and ATM/debit cards
• Support for PIN-less debit and Chinese debit cards

High volume, far-reaching business activity is no problem, as CyberSource is capable of processing transactions all the time, in real time, regardless of ordering peaks.

Mobile Payments

Mobile commerce (mCommerce) is becoming a dominant segment of the payments industry. Customers are shopping in-app, on mobile browsers, and at retail stores with tap-and-go contactless payments at an increasing rate. CyberSource enhances your business’s presence in mCommerce.

• Support for Alipay, Apple Pay, Masterpass, Samsung Pay (in-app and on the web), PayEase, PayPal, Visa Checkout, Google Pay, and more
• Ability to deploy instant checkout (account-on-file) payments without storing payment data
• PCI DSS compliant implementation that reduces your own PCI scope by not storing customer data in your environment
• One interface provides access to multiple wallets and payment types, simplifying IT maintenance and management
• Faster and easier reconciliation with consolidated reporting and transaction search capabilities

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Your Merchant Processor Should Know Your Name

When there’s an issue with your payment processing, the last thing you want is to call a large customer service center, sit on hold, and explain your situation to someone different every time.

Working with Bankcard Processors means having a real person you can turn to. Whether we’re able to meet face-to-face locally or work one-on-one from anywhere across the country, you have a direct relationship with someone who understands your business and your processing needs.

That personal connection can mean:

• Direct, responsive support when questions or problems arise
• One-on-one guidance instead of navigating a call center
• A processor who gets to know your business and its unique needs

Help reviewing your equipment, fees, and processing options as your business changes

Merchant processing is an important part of keeping your business running. With John Haire and Bankcard Processors, you’re not just another account number—you have someone you know and can call when you need help.

Pour On The Savings

 ...with Bankcard Processors + Vino

If you run a winery, we’ve got the perfect pairing for your business success. Through our partnership with Vino (www.joinvino.com), Bankcard Processors offers specialized merchant services designed just for wineries—helping you streamline transactions, lower costs, and create a smoother experience for your customers.

From tasting room sales to wine club memberships and online orders, our integrated solutions work seamlessly with Vino’s winery management platform, so you can focus on crafting exceptional wines while we handle the payments.

Raise a glass to better processing—contact us today to learn how Bankcard Processors and Vino can help your winery grow!

FREE Second Look

 Get a Free Second Look at Your Processing Statement

Are you sure you're getting the best value from your payment processor?

Many business owners assume they have a great rate, only to discover hidden fees, unnecessary charges, or opportunities to save when they take a closer look. That's why Bankcard Processors offers a complimentary Second Look Review of your current merchant processing statement.

We'll review your statement, explain what you're paying, identify potential savings, and help you determine whether your current solution is truly the best fit for your business.

There's no cost, no obligation, and you may be surprised by what we find.

Send us your latest processing statement and let us give it a second look!

Using Debit Cards

 

A debit card lets you pay with money that’s in your checking account. Debit cards aren’t the same as credit cards. Here’s how to know the difference.

What’s the difference between a debit card and a credit card?

When you open a checking account at a bank or credit union, you usually get a debit card. Debit cards look like credit cards, but they use money you already have. Credit cards use money you borrow.

With debit cards:

• You don’t get a bill every month. Money comes out of your checking account right away.
• You don’t pay extra money in interest.
• You don’t build a credit history.

With credit cards:

• You get a bill every month.
• You might pay extra money in interest if you don’t pay the whole bill every month.
• You can build a credit history if you pay your bill on time. It helps even more if you can pay the whole bill each month when it’s due.

Prepaid cards are a different kind of debit card. You buy a prepaid card and load money on it to spend. Many have extremely high fees.

When would I use a debit card?

Debit cards help you:

• buy things without using a check or cash
• get cash back when you buy something at a store
• get cash at an ATM
• Some debit cards are free to use, but some have fees.

What if I use all the money in my checking account?

Your debit card will be declined if your account doesn’t have enough money. You won’t be able to buy things. Some banks and credit unions have overdraft protection. This lets you use your debit card even when there’s not enough money in your account. But you might have to pay an overdraft fee and interest.

How can I keep my debit card safe?

Keep your debit card and PIN private. A PIN is a security code that you type in when you use a debit card. Never share your PIN or card numbers. If you lose your debit card, let your bank or credit union know right away. Ask them to cancel the card and send a new card. Ask your bank or credit union for account alerts by email or text. These remind you of how much money is in your account.

Your debit card use will show up on the statement you get every month from your bank or credit union. If you see a charge on your statement that you didn’t make, tell your bank or credit union right away. If you wait, you might not get your money back. Source

Network Tokenization 101

 

Today, network tokenization is crucial for businesses that accept card payments, whether online or in person. As a vital part of eCommerce fraud prevention, merchants must understand how these tokens work and simplify recurring payment processes while enhancing transaction security.

Tokenization has safeguarded digital payments since the mid-1990s, starting with the rise of online shopping. Early solutions replaced account numbers and other sensitive information with payment tokens, adding an extra security layer to secure payment pages. By the 2000s, merchants needed to simplify payments by connecting directly with their payment service providers, giving them more control over their customers’ payment experiences.Then, in 2014, modern network tokenization emerged, first used by digital wallet solutions to reduce the risk of data breaches. Card networks issued tokens to protect sensitive data for the first time, introducing global interoperability and dynamic security to help merchants stay ahead of emerging threats.

What is network tokenization?

Network tokens replace sensitive payment and card information throughout the transaction process. These digital payment tokens, unique and generated by card networks like Visa and Mastercard, serve as a secure proxy for sensitive data. They replace primary account numbers (PANs) and other sensitive details rather than being managed by merchants or their payment service providers (PSP).

Though often used interchangeably, network tokens and payment tokens serve different purposes. Network tokens are issued by card networks and are widely recognized across the entire payment ecosystem. In contrast, payment tokens encompass any tokens utilized in digital payments. There are several types of tokenization techniques, like payment gateway tokenization, PAN tokenization and PCI tokenization. That means network tokens are a type of payment token, but not every payment token is a network token.

Several key features define network tokens:

• They are created by card networks, not by merchants or payment processors.
• Each token is unique and linked to a specific customer and account number, making it useless if intercepted.
• Tokens are generated when customers start a transaction.

Network tokens can be used across channels and devices, providing more versatility than other payment tokenization methods. Unlike merchant or payment gateway tokens, network tokens are widely recognized across the payments ecosystem because they come directly from the card networks. A cryptogram – a security code – is typically included in each token transaction to authenticate the transaction. This means that if someone intercepts the token, it’s useless without the cryptogram, adding an additional layer of security to the payment process.

How does tokenization work?

All network tokenization processing occurs behind the scenes to facilitate frictionless payments for customers and enhanced transaction security for merchants. Tokenization begins when a customer initiates a transaction. Once they provide their payment details, information is sent to their card issuer, which generates a network token that is then shared with both the customer’s bank and the merchant’s PSP. Since the merchant can store this information to streamline and protect future transactions, network tokenization is sometimes called card-on-file tokenization.

Network Tokenization, Step by Step

Step 1; The customer enters their card details into the merchant’s system

Step 2; The merchant sends the request to the card network and requests a network token

Step 3; The card network works with the customer’s bank to approve or deny the request

Step 4; If approved, the card network generates a token and shares it with the merchant’s gateway

Step 5; The merchant stores the network token for future use

For example, if Jess saves her Discover card information in her account on an e-commerce site, the site can request a network token instead of the PAN. The next time Jess makes a purchase, the merchant submits the token and Discover maps it to Jess’ actual account information to complete the transaction.

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