It’s the first day of February 2019. Do you know where your 1099 forms are? If your organization is on top of things, your 1099s were issued to your service vendors and filed with the IRS long before the January 31 deadline. But if they weren’t, or you’re still recovering from the painful experience of tracking down all your applicable vendor payments, take heart: Next year, virtual card payments could eliminate your 1099 hassle.
How? By transferring responsibility for issuing those forms to your vendor’s bank. If you use virtual cards to pay those vendors for whom a 1099 is required, the payment settlement entity (PSE) – in this case, the merchant terminal bank used by the vendor you are paying – is responsible for the 1099 filings.
According to the IRS:
A PSE is a domestic or foreign entity that is a merchant acquiring entity, that is, a bank or other organization that has the contractual obligation to make payment to participating payees in settlement of payment card transactions.
In sum, if an organization pays a vendor with a payment card, they do not have to issue a 1099 report come end of year. The 1099 reporting is the responsibility of the merchant terminal provider (bank) used by the vendor.
Virtual card has so many advantages over other payment forms – from simplifying accounting procedures (including taxes) to ensuring payment security to providing actual revenue.