Despite the fact that the IRS initially said they would not attempt revenue matching from Form 1099-K, notices have gone out to some taxpayers assessing thousands of dollars in penalties! Form 1099-K requires credit card processors to report gross receipts to recipients as well as to the IRS. The IRS has begun a matching program that is now generating notices. Many of these notices provide basic instructions http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/New-Notices-Related-to-Form-1099-K to “read the notice thoroughly and complete any worksheets”.

The AICPA(American Institute of Certified Public Accountants) reports that “according to the IRS, these notices are being sent to taxpayers who ‘may have underreported their gross receipts’ or their Form 1099Ks show an ‘unusually high portion of receipts from card payments’ that do not match the receipts reported on their filed tax returns.”

There are many calculation issues with trying to match gross receipts from credit cards to actual revenue producing transactions such as cash back or tips. The form does not allow for separating these amounts which could significantly reduce the amount of revenue derived from the credit card transactions. The concern for many tax payers is that the cost of matching and tracking these amounts could be extensive. The AICPA is continuing to monitor the situation and your tax experts at JamisonMoneyFarmer  PC are as well.

If you receive a notice, it is very important to understand that the IRS is trying to gather any additional information they can. We have significant experience working with the IRS and we can best help you if you get us the notice as quickly as possible. Contact your tax professional at JMF and let us assist you in the process of responding to the notice. With the appropriate Power of Attorney form we can discuss the situation directly with the IRS on your behalf in many situations.