Starting with Tax Year ’11, all “payment card transactions” will have to be reported on information returns, just like all your other vendor payments — but in this case, you’ll be relying on the card issuer or other third-party processor to hand over the vendor’s name, address, Taxpayer Identification Number (TIN) and the gross amount paid.

All of this is to make sure that those payments (a) get reported and (b) get taxed properly. The rule also drives home the point that these transactions are subject to backup withholding if you don’t have a TIN for the vendor –  just as any other payment would be. The problem there is, you can’t backup withhold on a payment that’s already been made.

For that reason, the rule also allows card issuers and other payment processors to immediately start submitting the names and TINs of vendors in their networks to IRS’ TIN Matching Program. The hope is that by getting a running start, the payment processors can confirm accurate TINs for every vendor and avoid having to do any backup withholding.

A new form 1099 needed?

Two things are still up in the air:

1. How exactly these transactions will be reported, and
2. How you and your card processor will need to interact to ensure all the correct info is recorded and filed.

It may require a new form altogether, or IRS may opt to simply add a few lines or boxes to the existing 1099-MISC. It may also require you and the bank or other third party that facilitates these payments for you to get together to revamp processes, confirm transaction records, etc.

The good news is: You have two years to prepare — and IRS still has time to work out the kinks. We’ll keep you posted on any developments.

You can read all the details here.

It’s a problem because a card statement may not give you all the detail you need to confirm what portion of the transaction is taxable, what sales tax rate applies, or even whether or not the vendor already collected the tax.

That leaves Accounting trying to do a lot of detective work come year-end.

To minimize the hassle to you, talk to upper management about implementing one of these three steps to improve compliance — and eliminate some of your headaches:

1. Have your card issuer limit where and how cards can be used. Some of the criteria you can use are vendors in certain geographic locations, vendors that you know are required to collect tax, etc. This is the easiest option for Accounting, but purchasers may gripe about having limits placed on how they can do business.
2. Allow cards to be used at all vendors — but make purchasers responsible for confirming that applicable sales tax is included in the final charge. This is a good option if you trust purchasers to have the experience — and the time — to actually do all the follow-up.
3. If you can’t limit where/how cards are used, you need to have a procedure in place to check that there are no lingering sales tax liabilities on your books. Going line by line through each transaction is the safest, most thorough way to do so — but it takes a lot of time you probably don’t have. Alternative: You can probably use mini-audits or sampling techniques (where you base your total sales tax liability on a random percentage of transactions.) Just make sure you check with your state department of revenue to ensure the method you choose passes muster with their requirements.

The right vendor will help you narrow your options so you get all the functionality you need without adding services you don’t need — and which cost more.

With that in mind, here are four questions to ask potential vendors when you’re shopping for a program:

1. How much support do you offer once the program is set up? Ideally, you’ll want access to a dedicated rep who can answer your questions. Depending on how complicated your program is and what new software you may be adding, it may be a good idea to have scheduled training sessions with someone from the card issuer. If that’s the case, make sure the training is done efficiently (no drawn out multi-day programs) and that it’s not a separate charge.
2. How much paper/time/money will this actually save us? If parts of the process (like handling receipts and P.O.s) are still manual, or will require printing out documentation, you may not be getting as much benefit as it seems. Get a detailed estimate of how much time and money you’ll be saving with the proposed system. And then figure out how long it’ll take for those savings to recoup your upfront expenses.
3. Does your program address our biggest headache? If T&E is where most of your paperwork roadblocks develop, a standard p-card program probably won’t suit you as well as a travel-specific card. Make sure potential vendors know what your top concern is — and that their programs are adapted to meet those needs.
4. How secure is our info? No financial transaction should even be considered until you have solid answers about how secure all the electronically based info really is.

If you’ve already been down this road, what questions are you glad you asked your vendor — or wish in hindsight you had? Share your perspective in the comments.

To keep controls tight, save time and prevent fraud, a well-written policy on credit and purchasing card usage is a must-have. The question is: What exactly should it cover?

Although the finer points will vary depending on your specific company, industry and even the card program you choose, there are a few areas of universal concern. Based on recommendations by the National Association of Purchasing Card Professionals we suggest that at minimum, your policy clearly outline the following:

1. Types of transactions that are/aren’t allowed
2. Spending limits (by transaction type, time period and/or department/project)
3. A list of preferred suppliers (and if any rebates apply, it’s worth highlighting that information)
4. Procedures for card users and approvers. This should include everything from how a card is activated to documentation required for purchases, the approval process and how to handle rejected charges/fraud/lost or stolen cards.

All cardholders should also have a copy of a cardholder agreement — basically a list of their rights and responsibilities. This can be either a separate document, or included in your general card policy.

Getting the word out

Once you have a card policy in place, it’s important to keep it updated. At minimum, it should be reviewed once a year. Whether any changes are made, distribute the “updated” policy to all departments and cardholders. (It’s a good idea to give a copy to administrative assistants too, since they often end up actually submitting the paperwork to Accounting.)

When you distribute the policy, use multiple methods to ensure that no one “overlooks” the news. For example, you could post a copy on your company intranet, and also e-mail an electronic version to relevant departments. Having a few hard copies of the policy on hand is a good idea since some people simply won’t bother with electronic versions.

Bottom line: The more you can keep the policy “top of mind” for cardholders (and approvers) the more likely they are to actually stick to procedure. And that means fewer mistakes, improper charges or headaches for Accounting to deal with.

Fortunately, a few key steps are all you need to significantly increase the security of any cards you issue to employees. The Association for Financial Professionals identified  the four most commonly used controls to make sure that only authorized and approved transactions get put on company cards:

1. Requiring employees submit either original receipts or printed confirmations of Web-based transactions
2. Setting spending limits based on department/employee level (as opposed to setting one limit for all employees with cards).
3. Having a permanent card administrator or co-ordinator to monitor usage, train cardholders, etc.
4. Writing a detailed cardholder agreement (of their rights and responsibilities, as well as company policies) that all cardholders and their managers must sign.

Do you have your own advice on controls that have — or haven’t — worked at your company? Share it with us in the comments.

Total spending on purchasing cards is expected to grow 12% per year between now and 2012, according to the latest “Purchasing Card Benchmark Survey” by RPMG Research. In 2007, $137 billion in transactions were put on p-cards.

The growth is coming from two main drivers:

1. the amount spent per transaction is up 6%, and
2. cards are assigned to more people/departments within companies.

In fact, 80% of companies using p-cards in ’05 reported more p-card spending in ’07. And it’s not just large companies leading the way. More mid-sized companies reported increased spending than any other size of company.

In particular, companies were increasingly likely to use p-cards for purchases of:

• computers and peripheral equipment
• telecommunications services and products
• printing and copying services
• advertising and media, and
• transportation or delivery services.

Why the increase in usage?

It’s all about the bottom line. The average cost to process and pay a transaction on a purchasing card is about $70 less than using the old-school paper P.O./check method.

If your company (or a key vendor) has been reluctant to try p-cards, it’s worth revisiting the issue. With significant savings possible, setting up a card program could quickly make up for any upfront costs.

If you’re worried less about cost and more about headaches and aggravation while you’re switching over, bear in mind that choosing a solid card vendor can eliminate most hassle. And starting small — say, by only using cards in one department or with one vendor — can help you work out the kinks early and minimize disruption.

Here are six questions to put to potential card issuers to compare offers and make sure your company is getting the most bang for its bucks:

1. Is there any cost for participating the rewards program? (If so, ensure you’d earn enough back to make up for the additional cost.)
2. Is there a minimum charge volume you have to reach before rewards kick in? If so, is it tiered? (Example, you’d receive 0.25% back after spending $10k; 0.5% up to $25k; 1% for any amounts over 1%, etc.)
3. What criteria are used to determine rewards? Common factors include: total volume of spending; average spending per card; amount spent in certain merchant categories, etc.
4. Are there preferred vendors with whom we can earn additional rewards?
5. Will our rewards be affected if we already have negotiated discounts with participating vendors?
6. Do we have an option for choosing different types of rewards: travel vouchers, cash rebates, perks like free shipping, etc.

Any advice to share on how to get more rewards from corporate card issuers? Share ‘em in the comments.

The answer: Airline miles — and hotel points, cash back offers, or any number of other perks offered by the employees’ personal credit card issuers.

With the average business trip costing somewhere in the $1,500 range, even a modest rebate can be an attractive “bonus” to employees who are feeling the pinch of this economy. In fact, 74% of employees admitted they don’t always use their company’s preferred method of payment because of the perks they get from their personal cards.

Another 21% said they either never received a card, or the card isn’t accepted in some of the places they travel. That’s according to a recent survey by T&E magazine.

To get road warriors to use company-issued cards, you have two options: The carrot or the stick:

1. If possible, incentivize travelers to use the cards. For example, you might get upper management to agree to kick a percentage of the cards’ rebates back to employees as profit sharing, or as a bump in their departmental budgets. If that’s not an option, an internal competition to see which department can set the highest bar for card compliance might help.
2. If incentives don’t work, penalties might. Even a mild step, like flagging a department for non-compliance can send the message that the practice have to end. Key: Upper management has to demonstrate they’re behind your efforts, so make sure they’re on board first.

What have you tried to get more travelers to use company-issued credit and travel cards? Let us know in the comments what has — or hasn’t — worked for you.

Inefficient procedures, lack of company-wide usage, etc., can curb the value of any card program you put in place.

Fortunately, VISA has released an updated and expanded best practices study to help you make the most of whatever system you’re using. And if your company is just getting ready to dip a toe in the waters, it’s a great resource for figuring out what features you need — and what you can safely steer clear of.

Key points

The study looked at the entire procure-to-pay (P2P) process and found that the most important best practices were:

• Automating from start to finish
• Integrating the card program into company-wide initiatives
• Getting active support from upper management
• Developing integrated controls, and
• Using the full extent of reporting and spend analysis tools.

To get more ideas for how to make your own company’s card program more valuable and efficient, check out the full report.

The mystery charges ran the gamut from the possibly legit — like millions of dollars for computers and digital cameras — to the somewhat questionable (iPods).

These were the charges that really caught our eye:

•  Various U.S postal workers spent $14,000 on Internet dating sites. (Doesn’t everyone deserve to find love?)
• An Agriculture Dept. employee wrote more than $642k in “convenience checks” to her live-in boyfriend (Sounds convenient to us.)
• A State Dept. employee charged $360 worth of lingerie from the “Seduccion Boutique.” Supposedly, it was used during a drug enforcement training exercise in Ecuador. (We’re going to invoke the “Don’t ask, don’t tell” policy.) 

What’s the craziest purchase you’ve seen an employee try to get approved?