You may be higher on the IRS watch list than you know, thanks to previously overlooked 1099-K forms.
You’re a business owner. And like all business owners, you want to be paid. So aside from cash, you take debit and credit cards, using a company like Square or another merchant services provider. One swipe or tap and BOOM! – you’ve got your money.
All those credit and debit card transactions are recorded and added up on Form 1099-K, which is conveniently filed with the IRS.
So, you have your cash and card income, minus your business expenses, and if you’re lucky, you have some profit. Or maybe you break even. Or maybe you have a loss. That may lead you to think that you aren’t a high-income earner. But the IRS may think otherwise.
You may think you are under the radar, running your business with a modest profit, nowhere close to the six figures or more that other businesses are taking in. But the IRS may think otherwise.
Overlooked No More
The IRS can only go off the information they have. And if you haven’t been filing tax returns for your business, the IRS only has part of the picture – that overlooked 1099-K card income form (that they are now paying attention to).
The IRS, armed with those 1099-K forms listing the card income for your business, has you on the hook for owing taxes based solely on that card income total. That doesn’t take into account business expenses or anything else. You made $100,000 in credit card sales, they say you owe taxes on $100,000.
Even if you have a loss, you could still be targeted. Clients with high card sales numbers are getting targeted, even if they have off-setting expenses.
There is a huge difference between what is reported and what is taxable. If you aren’t filing, the IRS only has the reported 1099-K number. And that can be two to three times higher than your actual profit number, which is what is actually taxable.
And don’t think they aren’t going to come after it. In a report released by the Treasury Inspector General for Tax Administration earlier this month, for tax year 2017, TIGTA identified over 300,000 business taxpayers with over $335 billion in 1099-K income. These businesses appeared to have a filing obligation, but they weren’t identified by the IRS as non-filers.
You can bet they will be identified now.
So, what can you do?
Your best defense is accurate information. The IRS is basing their pursuit on a fraction of the information. File your back tax returns. Take into account those off-setting expenses. Don’t think you can stay “off the grid” by not filing any returns (If I don’t file, they don’t know & they can’t catch me). They already know. That 1099-K has told the IRS you’ve made income, and they are going to want to tax it.
Give yourself a fighting chance by completing the picture. Without all the necessary information, the IRS will file a substitute return based on what they’ve got – your 1099-K income, and you’ll have a big tax bill waiting in your mailbox.
One Last Thing
Giving yourself a fighting chance against the IRS starts with representation. It starts with Strategic Tax Resolution. We are the ‘guy on your side’ – trusted tax resolution experts with local offices and online-assisted means to better serve you. Strategic Tax Resolution handles the IRS and State taxing authorities on your behalf, working to negotiate the best possible outcome for you. Take control of your tax issues and call Strategic Tax Resolution today at 888-339-4914 and get started on your #RoadToResolution. Get Relief!