A: 1099K’s have been really confusing. First the Government says it’s one way, then it’s another way, then they make another change. As I mentioned to you, right now the 1099K’s still have to be prepared by the credit card companies and copies sent both to the IRS and to their customer. As I mentioned originally, we were supposed to reconcile these 1099K’s to Gross Income. Finally, they recognized that it was going to be very prohibitive to businesses because of sales tax that are added in, tips, cash backs and many other items.
Accordingly, they changed their rules. First of all, it was supposed to go into effect for 2011 returns and then they said no, wait on 2011. Now they say it’s not included at all.
As I mentioned to you, you’re still going to get copies of the 1099K’s and if you are audited, the IRS will still have access to that. Whether the IRS tries to reconcile this back to gross income, some commentators say they will, some commentators say they will be ignored.
I hope this answers your question. If you have any further questions, please feel free to contact me.
