Qualified Payment Card Agent Program

Providing Convenience and Protection

When your commercial customers (businesses or government agencies) pay you for services, they may be required to report those payments to the Internal Revenue Service (IRS) on Form 1099-MISC (Miscellaneous). To report properly, your customers need your taxpayer identification number (TIN), and the law requires that you provide it to those customers who need it for IRS reporting.

The Qualified Payment Card Agent (QPCA) program can assist you in providing this information to your customers conveniently and securely. QPCA also shields you and your commercial customers from backup withholding and helps your customers comply with IRS reporting requirements.

NOTE: If you are a merchant that provides merchandise only, or if you are not a U.S.-based entity, this program does not apply to you and you do not need to take any action.

QPCA overview

Your commercial customers are required to report payments made to you if the payment was for services (as opposed to merchandise) and the annual aggregate total of all transactions with your business is at least $600. To report, your customers need your taxpayer identification number (TIN), along with your legal business name, mailing address, and corporate status (e.g., sole proprietor, partnership, corporation). If your customer does not have your TIN at the time of the transaction, the law states that the customer must backup withhold 28 percent of the payment.

These laws make it difficult for commercial customers to be in compliance with IRS reporting requirements. To make it easier for your customers to get the information they need, and to reduce the number of customers to which you need to provide your information, the IRS has issued new regulations that will permit Visa to assume the duties that are usually the responsibility of your customer.

Under the QPCA program, Visa will validate your legal name and TIN with the IRS and provide the information in a secure way to your customers who need it to file Forms 1099-MISC with the IRS.

Note that the QPCA program is not yet in effect. Visa has applied to the IRS for QPCA certification and is awaiting IRS determination. Once QPCA certification has been granted, you will enjoy the full benefits and protections of the QPCA program.

Benefits of QPCA

QPCA provides significant benefits to you and your commercial customers:

• You will reduce the number of customers to which you must provide 1099 information.
• Your customers will have the information they need for IRS reporting.
• You and your customers will be shielded from backup withholding.

Most importantly, if you are a service merchant, you may see increased business from commercial customers, since QPCA assures them they will have the information they need for IRS reporting.

Is there a cost for this service?

No, there is no cost to you or your customers.

What information do my customers need?

To report payments on IRS Form 1099-MISC, your commercial customers need the following information:

• Your legal business name
• Your business or corporate address
• Your corporate status (e.g., sole proprietor, partnership, corporation)
• Your taxpayer identification number

Your information will not be shared with any other Visa cardholders – only with your customers.

The privacy of your information will be protected. Visa provides the information to your customers on a secure website, and your customers are required by law to maintain the confidentiality of your information and to use it only for the purposes of backup withholding and filing information returns with the IRS.

How the QPCA program works

Currently, Visa obtains your TIN and other information from your merchant bank in accordance with Visa Operating Regulations and provides it to your customers who need it for IRS reporting. Under the QPCA program, Visa will continue to provide these services; in addition, Visa will validate your name and TIN with the IRS to ensure they are accurate before providing them to your customers.

Your customers will receive a quarterly report showing the legal business name, address, corporate status, and TIN of each merchant with which they did business during the past quarter. The report also tells your customers whether Visa was able to validate your name and TIN with the IRS. If the validation was successful, your customers are assured they have correct information for IRS reporting.

You will automatically be included in the QPCA program unless you decline to participate (“opt out”) by returning a form to Visa. If you decide to opt out, it will be noted on the quarterly report to your customers.

If Visa is unable to validate your name and TIN with the IRS, or if you decide to opt out, your customers will need to contact you directly for your information. If they cannot obtain it within a two-month period after receiving the report, they are required to backup withhold on any future transactions.

How can I tell if I am a "service" merchant?

Payments for services are reportable to the IRS, whereas payments for merchandise are not. However, sometimes the distinction between services and merchandise is not obvious. To help your customers determine whether payment card transactions are reportable, the IRS allows them to use the Merchant Category Code (MCC).

Each merchant is assigned one or more Merchant Category Codes at the time it is set up to accept Visa payments. The MCC is a four-digit code used by the payment card industry to classify merchants into market segments. To help commercial customers determine which payments are reportable, the IRS classifies MCCs into two groups—reportable and non-reportable—depending on whether a merchant primarily furnishes services (for which payments are reportable) or merchandise (for which payments do not have to be reported).

Visa has published a document, called Merchant Category Codes for IRS Form 1099-MISC Reporting (PDF, 831k), that tells which MCCs are reportable and which are non-reportable. If your MCC is reportable, then your commercial customers will most likely need to report payments made to you if the annual aggregate total was more than $600.

History of Form 1099-MISC reporting

For more than 60 years, the IRS has required businesses, tax-exempt entities, and government agencies 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 these “payors” to obtain the TIN of the merchant (“payee”) before they pay, or else backup withhold a percentage of the payment.

When purchasing cards were created in the 1990s, these existing rules applied. As a result, a customer using a commercial payment card needed the legal business name (not the doing-business-as name), business or corporate mailing address, corporate status, and TIN of any service merchant with which it did business. Since this information is generally not included in the billing statement received by the customer, commercial customers often found it difficult to meet IRS requirements.

To address these issues, Visa began working with the IRS in the mid-1990s to develop new regulations that would ease the burden on Visa cardholders to collect TINs and backup withhold, while relieving merchants of the need to provide their information to multiple customers. The new regulations allow a qualified payment card organization, such as Visa, to solicit, collect, and validate merchant information on the customer's behalf. Visa has applied to the IRS for QPCA certification and is awaiting IRS determination.

Once implemented, the QPCA program will offer significant advantages to your commercial customers by facilitating the migration from paper-based payment methods, such as checks, to the more convenient and cost-effective commercial payment products.

Opting out of the QPCA program

As a merchant, you may decline to participate in the QPCA program by returning a form to Visa. If you opt out, you will not qualify for any of the benefits of the QPCA program and you will be responsible for providing your TIN directly to each of your customers who need it for IRS reporting.

Learn more

To learn more about QPCA, download QPCA for Merchants (PDF, 638k), an overview of the QPCA program, including frequently asked questions. You may also contact Visa at qpca@visa.com.

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.