Common use of IRS Withholding Regulations Clause in Contracts

IRS Withholding Regulations. Pursuant to Section 6050W of the Internal Revenue Code, merchant acquiring entities and third party settlement organizations are required to file an information return for each calendar year reporting all Transactions with payees occurring in that calendar year. Accordingly, Merchant will receive a Form 1099-K reporting its gross Transaction amounts for each calendar year. The Merchant’s gross Transaction amount refers to the gross dollar amount of the Transactions processed through its merchant account with Service Provider. In addition, amounts reportable under Section 6050W are subject to backup withholding requirements. Payors will be required to perform backup withholding by deducting and withholding income tax from reportable Transactions if (a) the payee fails to provide the payee’s taxpayer identification number (TIN) to the payor, or (b) if the IRS notifies the payor that the TIN (when matched with the name) provided by the payee is incorrect. Accordingly, to avoid backup withholding, it is very important that Merchant provide Service Provider with the correct name and TIN that it uses when filing your tax return that includes the Transactions for its business. In addition to all other charges and Fees set forth in the Fee Schedule, you may be charged a fee of $25 per month for each month during the Term that either subsection (a) or (b) applies to you.