WE HAVE OUR FIRST CLIENT TO RECEIVE A 1099K NOTICE
You may remember that as part of ObamaCare credit and debit card companies are required to send a 1099K to companies reporting the amount of credit and debit card sales. The IRS receives a copy of the form. At first we were supposed to reconcile the 1099K to the companies Gross Income. Common sense prevailed and the IRS decided that that because of sales tax; tips; gift certificate sales; different year ends; cash given back and numerous other reasons this would be impossible to monitor. Because of this the IRS ruled that you do not have to reconcile on the tax return. But that is not the end of it.
Since the IRS gets a copy of the 1099K it's computer compares the form to the tax return and if the amounts are not within some unknown percent the taxpayer gets a notice and has to reconcile. Of course the IRS developed a form to file out explaining the difference. This is a lot of work.
www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/New-Notices-Related-to-Form-1099-K.
Here is the notice that the IRS just released:
The IRS compared 1099-Ks filed by credit card companies and third-party networks such as PayPal with income shown on returns by taxpayers who received the forms. It is now mailing notices to firms it believes may have unreported gross receipts. But the 1099-K matching program is imprecise. The form reports receipts for a calendar year, which doesn't jive for firms with fiscal years. And businesses don't have to separately report amounts shown on 1099-Ks. So the form's usefulness as a tool to spot under reporting is lessened. Nevertheless, IRS still asks businesses to explain discrepancies and will follow up with firms that don't respond to the notices.
