Qualified Payment Card Agent Program
Providing Convenience and Protection
Visa is preparing to offer a new program that can help your organization obtain the supplier information needed for IRS Form 1099-MISC (Miscellaneous) reporting, while helping you take advantage of some exceptions from backup withholding requirements and protection from penalties associated with inaccurate reporting. The QPCA program has not been implemented yet. Visa has applied to the IRS for QPCA certification and is awaiting IRS determination. Once QPCA certification has been granted, your organization will enjoy the full benefits and protections of the QPCA program.
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A Qualified Payment Card Agent (QPCA) is a payment card organization that has demonstrated the ability to meet IRS standards for the collection, validation, maintenance, and distribution of supplier information needed for Form 1099-MISC reporting. As a QPCA, Visa will solicit supplier information on your behalf, validate the information with the IRS, and provide it to you for the purpose of Form 1099-MISC reporting.
The IRS regulations governing QPCA not only minimize the need for your organization to solicit taxpayer identification numbers (TINs) and other tax information from your suppliers, they provide some exceptions from backup withholding requirements for payments made to suppliers through QPCA. They also protect your organization from IRS penalties that may result from inaccurate reporting.
Benefits of QPCA
The QPCA program offers significant benefits to government agencies, private sector businesses, and tax-exempt organizations that use Visa commercial payment products. For example:
- You will not have to solicit Form 1099-MISC information from your suppliers; Visa will do this for you.
- Visa will validate each supplier’s taxpayer identification number (TIN) and legal business name using the IRS TIN Matching service.
- Visa will notify you on a quarterly basis of any suppliers whose TIN could not be validated by the IRS.
The QPCA program offers relief to businesses by providing:
- A grace period for obtaining a supplier’s Form 1099-MISC information.
- Some exceptions from backup withholding requirements.
- Protection from IRS penalties associated with inaccurate Form 1099-MISC reporting.
History of Form 1099-MISC reporting
For more than 60 years, the IRS has required all entities in a trade or business, including government agencies, tax-exempt organizations, and private sector businesses, to report on Form 1099-MISC when they pay an independent contractor at least $600 in a calendar year for services. For the past 20 years, the IRS has also required businesses to obtain the TIN of the supplier before paying, or else backup withhold a percentage of the payment. The IRS also imposes penalties associated with inaccurate reporting on Form 1099-MISC.
When purchasing cards were developed in the 1990s, they fell under these existing rules. As a result, a government agency using a purchasing card needed to solicit the legal business name and TIN of any service supplier with which it did business, or backup withhold a portion of the payment. Because the information needed for Form 1099-MISC reporting was not available on payment card transactions, it was difficult for commercial cardholders to comply with IRS reporting requirements.
To address these concerns, Visa began working with the IRS to develop new regulations that would ease the burden on businesses by allowing a QPCA to solicit and validate supplier information on their behalf.
How the QPCA program works
You will receive a formal notification of our intent to solicit and validate supplier information on your behalf. QPCA is an optional service, and you will be given a chance to opt out. Visa will then use the IRS TIN Matching service to validate the name and TIN of each of your suppliers.
Once Visa has been granted QPCA certification by the IRS, your organization will receive a quarterly report showing each supplier with which you did business during the past quarter. The report will indicate which of your suppliers are qualified by the IRS and which are non-qualified (meaning that the supplier's name/TIN could not be validated by the IRS). Upon being notified that one of your suppliers is non-qualified, you will have an additional two months to solicit the name and TIN from the supplier yourself. If you are not able to obtain the information within that timeframe, you will be required to backup withhold on any future transactions with that supplier.
According to the IRS, you may rely on the information provided by the QPCA for Form 1099-MISC reporting. If you rely on this information and the IRS later finds it to be incorrect, the QPCA regulations state that you have “reasonable cause” to request relief from any associated penalties that may be imposed by the IRS.
You will be required to maintain the confidentiality of supplier data and use it only for the purposes of backup withholding and filing information returns with the IRS.
IRS TIN Matching service
TIN Matching is a service run by the IRS that allows you to validate a supplier's legal business name and TIN prior to reporting in order to ensure their accuracy. As your QPCA, Visa will perform this service on your behalf.
The IRS will inform Visa whether or not the supplier’s name and TIN match IRS records. Visa will provide you with a quarterly report indicating the status of each supplier.
If a supplier’s name/TIN combination cannot be validated by the IRS, the IRS simply indicates a non-match; it does not provide a corrected name or TIN. There are two reasons for this: 1) the IRS has no way of knowing whether the problem lies with the name or the TIN, or both; and, 2) it is against the law for the IRS to disclose taxpayer information.
If Visa is unable to validate a supplier’s legal name/TIN with the IRS, the supplier's merchant bank will be informed and will contact the supplier to request the information again. If the supplier’s name/TIN cannot be obtained and validated within the grace period, you will be notified that the supplier is non-qualified.
Information needed for Form 1099-MISC reporting
To report to the IRS on Form 1099-MISC, your organization needs the following information for each supplier:
- Taxpayer Identification Number (TIN)
- Legal business name (corresponds to the TIN on IRS records; may be different from the DBA name)
- Complete address (street address, city, state, and ZIP code)
- Corporate status (e.g., corporation, partnership, sole proprietor, LLC)
- Sole proprietor name (only if the supplier is a sole proprietor)
As your QPCA, Visa will solicit this information from your suppliers on your behalf, verify each supplier’s name and TIN with the IRS, and provide the information to you in a quarterly report.
Using Merchant Category Codes to determine reportable transactions
Government agencies, private sector businesses, and tax-exempt organizations that use commercial payment products to pay for merchandise and services are required to report payments for services to the IRS. Historically, determining whether payments were for services or for merchandise was an arduous process and frequently required a review of individual transaction detail.
In July 2004 at Visa’s request, the IRS published a revenue procedure allowing clients with Visa commercial payment products the option to use Merchant Category Codes (MCCs) to determine which payment card transactions are reportable on Form 1099-MISC. The revenue procedure classifies businesses by MCC according to whether they predominantly furnish services (reportable) or merchandise (not reportable). For example, payments to a company that primarily sells computer hardware would not be reportable, whereas payments to a company that primarily performs computer maintenance and repair would be reportable.
Visa has published a downloadable booklet entitled Merchant Category Codes for IRS Form 1099-MISC Reporting (PDF, 831k) that contains a complete list of MCCs and their designation as either reportable or non-reportable.
Opting out of the QPCA program
Government agencies, private sector businesses, and tax-exempt organizations that use Visa commercial payment products may decline to participate in the QPCA program by returning an opt out form. If you opt out, you will not qualify for any of the benefits of the QPCA program, such as the exceptions from backup withholding and protection from penalties associated with inaccurate reporting.
Visa has prepared several publications that are available free of charge and provide additional information about IRS Form 1099-MISC reporting.
- Purchasing Card and IRS Reporting Requirements (PDF, 80K) – A look at some of the issues faced by purchasing card users in meeting IRS information reporting, withholding, and payee documentation requirements.
The complete texts of the IRS regulations and revenue procedures governing QPCA are available here:
IRS 2004 Regulations
IRS 2004 Revenue Procedure
IRS 2007 Proposed Rules
IRS 2007 Proposed Revenue Procedure (see page 135)
You may also call the Internal Revenue Service 1099 Payor Call Center at (866) 455-7438.