New requirements imposed by the Internal Revenue Service this year have pool retailers checking their books with extra care.
For 2011 tax returns, third-party companies that process credit and
debit transactions — such as PayPal, Visa and American
Express — must report the gross total of transactions they
processed each month for each merchant they serve.
In addition to submitting these totals directly to the IRS, payment
processors also are required to report them to the merchants whose
transactions they processed, via the new form 1099-K. In addition,
business tax forms have been updated to include a line item for
1099-K income, which merchants are required to include on their
“This means they can work out how much cash you
process,” said Dale Howard, owner of B&L Pools in
Phoenix. “They could look at your forms and say, ‘Your
total reported credit card income is the same as your overall total
— so we’ve got a problem here.’”
Only businesses that process fewer than 200 payments (or less than
$20,000) per year are exempt from these reporting
The changes are just the latest reflections of a government
campaign to close what the IRS has described as a “tax
gap” — that is, billions of dollars of income that the
agency says businesses fail to report each year.
“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.
Form 1099-K itself was introduced in the Housing Assistance Tax
Act, a 2008 bill signed into law by President George W. Bush. But
the requirements that payment processors actually file the form,
and that businesses report its total on their tax returns, were
piggybacked onto the Affordable Health Care Act, a bill that
President Barack Obama signed into law in 2010.
So far, retailers who’ve been keeping precise records report
that the process has gone smoothly. “We’ve received our
1099-Ks, and the totals on them match everything we have on
record,” said Joe Lamarre, controller at Patio Pools & Spas, a Pool & Spa
News Top Builder in Tucson, Ariz.Meanwhile, smaller retailers said they’re trusting their
accountants to make sure everything’s aboveboard.
“Our CPA handles any new forms that come along,” said
Dillan Sheffield, owner of Hacienda Pools in Weatherford,Texas.
Others have noted, though, that the form has been helpful for their
own internal record-keeping because it breaks down receipts by
month, allowing accountants to match these figures with their own
month-by-month totals. This makes sense from the IRS’
standpoint as well because it ensures that the rolling years used
by payment processors and retailers line up with each other, and
with the federal government’s timing.
“It’s actually a pretty handy piece of paperwork,” Lamarre said.