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 so that we can determine what response is required.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>