Merchant Account IRS Reporting Fee Explained
What is an IRS reporting fee? An IRS reporting fee, also known as an “IRS regulatory fee” or an “IRS filing fee,” is a fee imposed by merchant account providers to recover their administrative costs for reporting a merchant’s annual credit card processing volume to the IRS. Each year since 2011, payment processors have been required to supply a 1099-K form to both the IRS and to each of their merchants who process over $20,000 in a year. A 1099-K form reports the total amount paid to a merchant that year through credit card sales.
It is strictly the responsibility of the payment processor to generate and supply a 1099-K form to its merchants and to the IRS. Nevertheless, some merchant services providers have started to impose IRS reporting fees to cover the costs associated with completing and submitting these forms. These costs may be charged to the merchant monthly or annually and are often completely unrelated to the actual cost of generating and supplying each 1099-K. In general, merchants should not consent to paying IRS reporting fees because these fees usually represent pure profit for processors. In cases where the IRS reporting fee is non-removable, merchants should either find a different processor or negotiate the fee down to an amount that represents the processor’s actual cost for filling out and sending a single page of information.