What's in a Name?

We have a guest blogger on Direct Talk today!

Independent Credit Card Processor, Matt Yablunosky, shares his thoughts on a super-sensitive, high-charged issue facing merchants during tax season -- State or Federal tax collection agencies withholding your earnings until they know who you are.

What's in a name? Plenty, if you are the IRS!

As Americans, we pay state and federal taxes on the income we generate. Or more accurately, on the income we report.

As American business owners, reports of our taxable income flow from multiple sources. One source is the revenue generated from your customers’ credit card payments. Taxable income earned from credit card payments by our customers gets reported to the IRS and state coffers through an official document prepared by our credit card processor, sometimes called our merchant services provider.

When tax collectors begin determining what we owe from credit card sales, they first want to confirm who we are. They ask “Does the legal business name provided to us by the credit card processor match the name we have assigned to the merchant’s federal Tax Identification Number (TIN) or Employer Identification Number (EIN)?” If the answer is no, you may be subject to withholdings until the answer is yes.

Say what? Is that legal? Yes, this stuff happens all the time.

It is certainly understandable that the IRS (and state officials) want to ensure they collect the right amount of taxes from the right businesses. But what if in 2016 you filled out a new credit card processing application with the legal business name “Yablunosky and Sons Roofing, Inc.” and your 2015 tax return was filed under the name “Yablunosky & Son Roofing”. See the three differences in spelling and wording? The IRS certainly will. At the first sign of identity uncertainty, the IRS will mail the business owner what’s called a ‘B Notice’. This B Notice is a letter advising the merchant their 1099k data on file with their credit card processor does not match IRS Records. This B Notice letter will contain specific instructions how to resolve the business’s identity discrepancy and the time frame required to do so.

Some merchants may receive a B Notice, even if their data matches IRS records. However, they still need to respond to the B Notice.

Until the IRS gets the correct information from you, they will often instruct your credit card processor to withhold a portion of your credit card processing sales revenue.

Here are seven ways to avoid costly withholdings from tax collectors who don’t know who you are:

Ensure the legal business name on your credit card processing application matches the name on file with the IRS.
Ensure the legal business name on your credit card processing application matches the TIN or EIN on file with the IRS.
Ensure the business category type assigned to your legal name on file with your credit card processor matches the business category on file with the IRS.
Ensure the legal business name on your credit card processing application matches the name on your business banking account and checks.
Review how you are legally identified in all ‘welcome/confirmation’ documents from your credit card processor once your account first goes live.
Avoid establishing a legal business name with lots of punctuation marks and abbreviations.
Submit a federal issued Form SS4 to your credit card processor and tax collector at the first sign of danger.

Tax payments are unavoidable. Getting your hard-fought earnings withheld from a tax collector is avoidable. To contact Matt about this or other credit card processing aspects, please drop him an email at Matt@RetainRevenue.com or call him at (919) 247-8823.