Understanding the Visa and Mastercard Settlement
May 21, 2024
What You Need to Know About the $5.54 Billion Credit Card Settlement
Recently, credit card giants Visa and Mastercard reached a $5.54 billion settlement with merchants overinflated credit card interchange fees, commonly known as “swipe fees.” This decades-long legal battle has resulted in the largest antitrust class-action settlement in U.S. history.
What Does This Mean for Merchants and Consumers?
While the Visa and Mastercard settlement still awaits approval by a federal court, its approval could benefit not only merchants but consumers as well.
Key Points of the Settlement:
- Visa and Mastercard have agreed to lower published credit-card interchange fees by four basis points in the U.S. for at least three years.
- Neither company will raise interchange fees for five years above the rates that were in place at the end of 2023.
According to a statement from one of the law firms involved in the settlement, “the interchange fee reduction could save merchants $29.79 billion in the five years after the settlement is approved.”
Eligibility for Claim Submission
If your business accepted Visa and/or Mastercard between January 1, 2004, and January 25, 2019, you may be eligible for a share of a $5.54 billion payment card settlement. This includes businesses that have since closed or gone bankrupt.
How to Submit a Claim
In an Order dated May 14, 2024, the Court granted an extension of the claims-filing deadline. The new deadline to submit claims is now August 30, 2024.
The official court-authorized settlement website can be found here.
There are two methods by which you can submit a claim:
- If you received a Claim Form in the mail and want to file a claim online using the Claimant ID provided, you will select that option on the settlement website.
- If you did not receive a claim form in the mail, you can begin the claim filing process by clicking the button for Taxpayer Identification Number (TIN). Once you create your account using your TIN, you will need to provide supporting proof of authorization documentation in order to access your interchange transaction fees. Proof of authorization could be a certificate of incorporation, a certificate of dissolution, a W-9, or a utility bill.
For step-by-step instructions on submitting a claim by either method, review the following video provided by the court-authorized website: https://www.youtube.com/watch?v=TuHOnvlVFpI
Potential Settlement Payout
The amount you receive from the settlement fund will be based on your actual or estimated interchange fees attributable to Visa and Mastercard transactions between January 1, 2004, and January 25, 2019.
Factors Influencing Payout Amount:
- The total dollar value of all valid claims filed.
- The cost of class administration and notice.
- Applicable taxes on the settlement fund.
- Attorney fees and expenses.
Money awards to the Rule 23(b)(3) Class Plaintiffs for their representation of merchants in MDL 1720, culminating in the Class Settlement Agreement, all approved by the Court.
Conclusion
The Visa and Mastercard settlement represents a significant resolution to a long-standing issue affecting merchants and consumers. By understanding the details and eligibility criteria, businesses may use this settlement to recoup some costs incurred from inflated swipe fees. For more information and to submit your claim, visit the official settlement website: https://www.paymentcardsettlement.com/en
Categories: Other Resources
Moore v. United States: The Supreme Court’s Tax Dilemma
Dec 13, 2023
In the world of taxes, all eyes have been on the Supreme Court and the case of Moore v. United States. What makes this case so monumental, you ask? It’s not every day that the Supreme Court hears arguments around tax laws affecting individuals, much less a high-stakes case that could redefine the meaning of taxable income.
At the heart of Moore v. United States is a provision of the Tax Cuts & Jobs Act (TCJA) enacted in 2017, requiring companies to pay taxes on foreign profits that had previously been untaxed. This mandatory repatriation tax is now being called unconstitutional by one Washington state couple.
In 2005, Charles and Kathleen Moore invested $40,000 in KisanKraft, a farm equipment retailer based out of India. The couple alleges that they never received any foreign profit payments from the company because all such profits were reinvested by KisanKraft. The Moores argue that such “unrealized gains” are not actually income and therefore should not be taxed. Their case argues that the TCJA provision violates apportionment requirements under the 16th Amendment because it allegedly taxes them on ownership of personal property — in this case, their KisanKraft shares — rather than on realized or received income.
While the Moores are simply seeking a refund of the one-time $15,000 increase in their tax bill due to the change in the law, the case carries much broader implications. A ruling in their favor could threaten other provisions of the tax code. The Justice Department has also noted that a ruling by the Supreme Court invalidating the mandatory repatriation tax could cost the U.S. government $340 billion over the next decade. That amount could grow exponentially if the decision invalidates other tax provisions as well.
While a ruling is not expected until June of 2024, some justices have signaled the possibility of upholding the tax by attributing the income earned by the foreign company to its shareholders. William Vaughan Company’s tax team is closely monitoring updates in the Moore v. United States case. Be sure to subscribe to our insights as we continue to share any breaking news on the ruling.
Categories: Tax Compliance
Should I Cancel My Ohio CAT Account?
Sep 26, 2023
Commercial Activity Tax Changes Under Ohio House Bill 33
We recently covered the changes to Ohio’s tax codes that were enacted by Ohio House Bill 33 after it’s passage into law in July of 2023. The new law introduced several changes to state tax codes that could prove advantageous for Ohio business owners. One of the more significant changes to the tax law relates to how CAT is reported.
The CAT is calculated using a business’s taxable gross receipts. As a result of the passing bill, beginning January 1, 2024, the CAT annual minimum tax will be eliminated, and the exemption amounts for businesses will be significantly increased. Under the new law, the CAT rate of .26% will stay the same, but will now only affect taxpayers with gross receipts over $3 million in 2024, (that number will increase to $6 million in 2025).
Taxpayer Implications
Businesses currently reporting under $1 million in gross receipts, and that are predicted to have less than $3 million in gross receipts in 2024, should cancel their CAT account effective December 31, 2023, and file a final annual CAT return, due May 10, 2024. Once the final CAT return is filed, taxpayers with gross receipts under the exemption amount will no longer have to file an annual CAT return in subsequent years. Taxpayers that predict they will have annual gross receipts between $3 million and $6 million should file their final CAT return the following year, 2025. All remaining CAT payers that do not meet the exclusion amount must still file quarterly returns for tax periods after January 1, 2024.
If a taxpayer does not cancel their CAT account, they will still be required to file a CAT return until the account is canceled, even if nothing is due. Taxpayers may cancel their CAT account by visiting the CAT Cancel Account Transaction on the Ohio Department of Taxation’s Business Gateway (preferred method.) Alternatively, those wishing to cancel their CAT account can also complete and submit a “Business Account Update Form” available in the “Tax Forms” section of the Ohio Department of Taxation’s website.
If a business’s gross receipts happen to exceed the exclusion amount in subsequent periods, the taxpayer must reactivate their CAT account and resume filing returns and paying the Commercial Activity Tax at that time.
Conclusion
Ohio House Bill 33 has made several alterations to Ohio’s tax laws, with the regulations around Commercial Activity Tax being particularly affected. For more information on these changes, visit the official release from the Ohio Department of Taxation.
William Vaughan Company will continue to monitor the changes resulting from this bill as well as other state and federal tax bills.
Questions or concerns about how these changes apply to your specific CAT filings? Connect with us today to get a better understanding of these new developments and mitigate tax risks in your business.
Categories: Tax Compliance
Freeze on Employee Retention Credit (ERC) Processing
Sep 18, 2023
What happened:
As of last Thursday, the IRS temporarily halted the processing of new Employee Retention Credit (ERC) claims, owing to a surge in ERC-related scams and fraudulent submissions. IRS Commissioner Danny Werfel expressed concern over genuine small businesses falling prey to deceptive schemes. “As we move further from the pandemic, it becomes evident how the noble intentions behind this program have been exploited,” stated Werfel.
Initially, the ERC was designed to offer relief to businesses and tax-exempt entities. Yet, the allure of a refundable tax credit has led to a rise in opportunistic consulting firms. Many of these firms, while promising substantial refunds, neglect to inform businesses about crucial wage deduction adjustments an other limitations contained within the ERC rules.
Key details:
- The processing freeze will be in effect until at least Dec. 31, 2023, meaning no new ERC claims will be entertained.
- The IRS will still review the 600,000 previously filed ERC submissions.
- While payments on prior claims will persist, claimants might need to furnish extra documentation to confirm their claim’s authenticity.
- The standard processing timeframe for ERC claims may exceed 180 days, especially if further scrutiny or an audit is required. The IRS notes that several claims are already earmarked for audits.
- Due to the heightened examination of filings, expect processing delays and intensified ERC audit inquiries and criminal probes. The agency’s main focus is on potential fraudulent promoters and enterprises.
- The IRS emphasizes that illegitimate ERC claimants will be liable to repay the credit, potentially with added penalties. Claiming incorrectly might leave businesses in a financially precarious position.
Next Steps:
Given the intricate nature of the credit calculation, it’s imperative to partner with a trustworthy firm. Businesses should remain wary of overtly enticing tax-saving pitches. William Vaughan Company, a trusted industry leader, is poised to offer guidance and insights to anyone with concerns about their ERC filing.
Finally, the IRS has provided resources, including updated FAQs, to ensure businesses aren’t swindled by scam promoters or pressured into fraudulent applications. A forthcoming settlement program will also be launched by the agency this fall to oversee the repayment of certain unjust ERC claims. For comprehensive details, refer to the IRS’s official ERC website.
Categories: Tax Compliance
Ohio House Bill 33 Explained
Jul 17, 2023
Ohioans can expect significant changes to state tax laws next year thanks to Ohio House Bill 33. The newly passed piece of legislature, signed by Governor Mike DeWine on July 3, 2023, establishes state operating appropriations for fiscal years 2024-2025. This comprehensive legislation also brings several tax advantages specifically designed to benefit Ohio business owners. Taxpayers can expect changes to personal income tax, Commercial Activity Tax, Pass-Through Entity Tax Credits, and Municipal tax.
Personal Income Tax Reductions
The first significant change introduced by House Bill 33 is a reduction in personal income tax rates. The new law establishes two tax brackets based on income levels. If you earn over $26,050, you’ll pay a marginal tax rate of 2.75%. For individuals with income over $100,000, the rate increases slightly to 3.5%. Those earning $26,050 or less will be exempt from paying any income taxes to the state of Ohio.
Commercial Activity Tax (CAT) Exemption
House Bill 33 also brings changes to the Commercial Activity Tax (CAT), affecting businesses in Ohio. CAT is determined based off a business’s taxable gross receipts. The new law significantly increases the annual exemption threshold for businesses. Previously, businesses with taxable gross receipts under $150,000 were exempt from paying CAT. However, under the new law, the exemption amount rises to $3 million for the 2024 tax year and further increases to $6 million starting in 2025. This means that a large amount of Ohio-based businesses will no longer have to pay CAT.
Pass-Through Entity (PTE) Tax Credit
Another important change under House Bill 33 is the introduction of a tax credit for Ohio residents subject to double taxation on pass-through entity (PTE) income. Pass-through entities include businesses like partnerships, S corporations, and limited liability companies (LLCs). Often, individuals earning income from such entities face double taxation, meaning they pay taxes at both the entity level and the individual level. The new law allows Ohio residents to claim a credit on their individual tax returns for PTE taxes paid to other states, helping alleviate the burden of double taxation.
Municipal Tax Changes
Finally, House Bill 33 will enact several changes to municipal taxes in Ohio. Municipal taxes are taxes imposed by local governments, such as cities and towns. The new law reduces fees and penalties for late filing of municipal income tax returns, making it more affordable for taxpayers to comply with local tax obligations. Additionally, the bill extends the due date for filing municipal net profits tax returns from October 15th to November 15th, giving individuals and businesses more time to prepare their tax returns.
Furthermore, House Bill 33 exempts individuals under the age of 18 from Ohio municipal income tax. This means that high school students who have part-time jobs or earn income from other sources will not have to pay municipal income tax in Ohio.
Other Changes
The newly passed bill includes numerous other provisions aimed at providing tax relief for both business and individuals. From baby wipes and cribs, to traffic control services often used by construction contractors, taxpayers can expect additions to the state’s list of tax-exempt goods and services. Businesses with remote or hybrid employees in Ohio can also expect a new option for calculating their municipal net profits tax.
Conclusion
Ultimately, the passage of Ohio House Bill 33 introduces several significant changes to the state’s tax landscape. William Vaughan Company’s tax team will continue to monitor changes resulting from House Bill 33 along with other state and federal tax updates. For both businesses and individuals, understanding tax law is crucial when it comes to making informed financial decisions. Don’t leave your finances up to chance, connect with us today to understand how House Bill 33 may effect your specific situation.
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Categories: Tax Compliance, Tax Planning