IRS: One-Year Delay of Section 6050W Backup Withholding Penalties

Prompted in part by a letter from the National Grocers Association, the Internal Revenue Service (IRS) has provided a one year delay of the penalties for good faith efforts to implement the Section 6050W Rule, which requires electronic third-party processors and acquirers to match up a businesses tax payer identification number (TIN) with the business name and verify this information with the IRS.

If the match was not made or verified by the IRS before January 1, 2011 the merchant would face a daily backup withholding of 28 percent of electronic receipts.

On October 7, 2011 N.G.A. wrote IRS Commissioner Douglas Schulman requesting that the IRS provide penalty relief and delay backup withholding for one year. The IRS has granted this request.

Although penalties of 28 percent backup withholding will not be assessed before January 1, 2013 N.G.A. strongly recommends merchants continue to work with their third-party processors or acquiring banks to verify that each TIN matches with the company name and that this information is verified with the IRS.

Text of Notice 2011-88 can be downloaded at: http://op.bna.com/dt.nsf/id/emcy-8n2q6g/$File/N-11-88.pdf.

Text of Notice 2011-89 can be downloaded at: http://op.bna.com/dt.nsf/id/emcy-8n2q6m/$File/N-11-89.pdf.

Independent grocers with questions can contact Tom Wenning at (703) 516-8805 of [email protected]