Form
1099-K is a new information return sent to businesses by "payment
settlement entities" reporting the amount of credit card and other
electronic receipts that were processed for the business. The IRS also receives
a copy of Form 1099-K and cross checks the reported amounts with the business's
total income reported on its tax return. Where the numbers don't seem to make
sense, the IRS sends notices to businesses telling them they "may have
underreported gross receipts." Notices go on to say "This is based on
your tax return and Form(s) 1099-K, Payment/Merchant Cards and Third Party
Network Transactions that show an unusually high portion of receipts from card
payments."
The
IRS has sent thousands of letters labeled "Notification of Possible Income
Underreporting" to small business owners. The notification project is
ongoing as part of the IRS's campaign to deal with the "tax gap," the
difference between taxes owed and taxes actually collected.
If
you receive a notice, contact us immediately at (518) 798-3330 so that we can determine what
response is required.
