Why Updating Your Merchant Account Before 1099-K Season Matters

Keeping Your Merchant Account Info Updated Can Save You Big Trouble at Tax Time

If your business accepts credit cards, you’re likely familiar with the annual 1099-K form a tax document issued every January that reports your total credit card processing volume to the IRS. But what many business owners overlook is the importance of keeping their merchant account details current before these forms are generated.

Why does this matter so much? Because even the smallest mismatch—like an outdated legal name or an incorrect EIN—can lead to IRS complications, backup withholding, or costly delays in filing your taxes. At Dharma Merchant Services, we see these issues come up every year—and we’re here to help you avoid them.

Let’s break down exactly why updating your account before year-end is so important and how you can stay compliant with confidence.

What Is a 1099-K and Why Does It Matter?

A 1099-K form is issued by your payment processor (like Dharma Merchant Services) to both you and the IRS. It reports the total amount of credit card payments your business accepted over the prior calendar year.

This form is used by the IRS to ensure your reported income matches what’s been processed through card networks like Visa, Mastercard, Discover, and American Express. Starting in 2023, the threshold for 1099-K issuance dropped to just $600 in annual credit card payments, meaning nearly every business that accepts cards will receive one.

If your business details are incorrect when this form is generated, the consequences can be serious.

The Risks of Not Updating Your Merchant Account

Here are the most common problems merchants face when their account information is outdated at the time 1099-K forms are filed:

• IRS Backup Withholding – If your legal business name and TIN (Taxpayer Identification Number) do not match what the IRS has on file, the IRS may impose backup withholding of 24% on future payments. This means nearly a quarter of your money could be held back until the issue is resolved.
• Incorrect Tax Filings – Your accountant will rely on this 1099 information to reconcile revenue and file accurate taxes. If the form doesn’t reflect your correct business name or processing totals, it could result in incorrect filings or IRS notices.
• Delays in Funding or Account Freezes – Some processors (especially banks) may place holds on your deposits if your account is flagged for IRS issues related to 1099-K mismatches.
• Time-Consuming Corrections – Once a 1099-K is issued, correcting it isn’t simple. You’ll need to go through your processor’s support team, possibly resubmit documentation, and then wait for reissuance—costing valuable time during a busy tax season.

When and What to Update in Your Merchant Account

To avoid these headaches, Dharma Merchant Services recommends reviewing your account information every December, or immediately after any changes to your business structure.

Here’s what to double-check:

• Legal Business Name – Must match IRS records exactly
• Taxpayer Identification Number (TIN or EIN) – Double check your SS-4 or CP575 form from the IRS
• Business Structure – Switching from sole proprietorship to LLC? Let us know
• Address and Contact Info – Keep everything current for communication
• Ownership Changes – Any new partners, ownership transfers, or legal changes? Tell us right away
• New Bank Account? – We need a voided check or bank letter to update your deposit details

How Dharma Merchant Services Can Help

At Dharma Merchant Services, we’re committed to making sure our merchants stay compliant and avoid unnecessary tax-related stress. Our support team is available year-round to help you review and update your account. We’ll walk you through exactly what you need to send us and ensure everything is aligned with IRS requirements.

Need help verifying your information or submitting changes? Just contact us at support@dharmams.com or call 866-615-5157. We’ll make the process fast, secure, and simple.

Keeping your merchant account information up to date might seem like a minor task, but it plays a major role in ensuring smooth IRS tax reporting through the 1099-K form. An incorrect business name or tax ID can create a cascade of issues—from backup withholding to costly delays in filing your taxes.

By reviewing your account each year before January, you can prevent problems and stay focused on running your business. And with Dharma Merchant Services by your side, you’ll always have a knowledgeable partner to help keep you compliant.

Don’t wait—update your merchant account today and start the new year stress-free.