How Does the New IRS Section
6050W Affect Attorneys?
If you are a law firm processing credit cards, you
are now subject to the newest IRS requirement –
What is IRS Section 6050W?
The gross dollar amount of all
credit card transactions must be
reported on a special 1099-K, re-
gardless of returns or processing
The IRS is required to collect
the 1099-K from credit card
processors (such as LawPay, First
Data) and third party payment
aggregators (PayPal, Square) for
merchant credit and debit card
transactions, as of Jan. 2012.
What about my IOLTA?
For attorneys, Section 6050W
doesn’t make a distinction between
credit card transaction deposits
made to a trust or IOLTA account
and an attorney’s operating account.
This has attorneys concerned the
IRS will view these transactions
incorrectly as income. However,
there are two items to note: ( 1)
the new 1099-K is only intended
to be “informational”; ( 2) your
processor should include a mer-
chant industry code on your 1099-K
identifying you as a law firm or
provider of legal services.
In 2013 the IRS may begin imposing a 28% withholding penalty on
all credit card transactions if the
merchant information on file is not
an exact match with IRS records.
Section 6050W requires credit
card processors verify an exact
match with their files and your
federal tax ID and legal name in
order to file your 1099-K correctly.
Due to the steep penalty, it is
imperative that you confirm the
information on your 2012 1099-K.
If you have not yet received a
1099-K from your processor, call
and request a copy. The IRS re-
quires your processor to send a
notification; but in the case of a
mismatch, the ultimate liability lies
squarely with you and your firm.
No need for alarm
The intent of Section 6050W is
to assist the IRS in identifying
businesses not filing accurate tax
returns. The IRS appears to be
targeting businesses most likely
to omit or avoid reporting correct
Payment options for clients;
prompt payment for you
The new rule should have minimal
impact on your business. The ben-
efits of accepting credit cards are
far more impactful. Offering your
clients flexible payment options
while getting paid quickly and se-
curely far outweighs any potential
For more information visit
www.IRS.gov or consult directly
with your tax advisor.
AMY PORTER, CEO, AFFINIPAY/LAWPAY
The LawPay Program is a custom payment solution designed by
AffiniPay for attorneys. LawPay complies with ABA and state
requirements for managing client funds.