Kevin Packman is a Partner in the
Miami office
Forms 1099K have been filed by credit card processors since 2011
to report all transactions on their system. (See:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/New-Notices-Related-to-Form-1099-K).
The IRS has utilized these disclosures to focus on small businesses
that have a high level of credit card sales. The IRS compares the
businesses credit card gross receipts against the industry norm. If
the IRS believes that the credit card receipts comprise too high a
percentage, it sends out a notice. The theory being that the
business might be underreporting cash receipts.
Since Fall 2012, the IRS has issued letters to 20,000 small
businesses alerting them to the fact that they might be
underreporting gross receipts. As this article in Money magazine
indicates, a small business will have thirty days in which to reply
to the IRS Notice.
