IRS to require separate reporting of credit card transactions
■ Proposed regulations will apply to other electronic payments as well.
By Victoria Stagg Elliott — Posted Jan. 27, 2010
Medical practices that take plastic soon might have to deal with another piece of paper when reporting this income to the Internal Revenue Service.
The Housing Assistance Tax Act of 2008 requires companies that process electronic payments to gather data on these transactions in 2011 to report them to the IRS in 2012.
According to proposed regulations issued by the agency Nov. 23, 2009, small businesses, including medical practices, that collect at least $20,000 of revenue by way of credit or debit cards or carry out at least 200 of these types of transactions will receive a 1099-K form from their processor.
The forms, which will need to be provided to the IRS, are similar to the various 1099s that medical practices receive from insurance companies.
Electronic payments would have been reported previously as cash. This new requirement was taken as part of the agency's efforts to ensure that business tax returns do not miss any income.
"The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses," said IRS Commissioner Doug Shulman, in a prepared statement. "The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program."
Experts say that those who fill out the tax forms for medical practices need to ensure that the total income reported to the IRS is greater than or at least equal to that collected electronically and tracked on this new form.
"This change should not really affect honest practices at all," said Gary Bode, a certified public accountant in Wilmington, N.C., who specializes in working with medical practices.
The IRS is scheduled a public hearing on the implementation of this change Feb. 10 in Washington.