The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: IRS Letter Charge Sales||Date: 8/15/2013 11:17 AM|
|Author: Wradical||Number: 119004 of 124965|
You all probably knew this was coming, I didn't. Have you seen anyone that has received a letter?
I have not. To my knowledge none of our clients have received it, at least that they've mentioned. I saw an article about it a day or so ago in the Wall St. Journal. They also mentioned the form that's requested to be returned, and I'm equally curious about that.
If you (generic you) are reporting all your sales, I don't see a problem.
The WSJ article mentioned that possible mismatches would occur with businesses that do all, or virtually all, of the sales and/or collections over the internet, where payments are received by credit cards and/or Paypal. (Payment processors such as Paypal are also subject to 1099-K reporting.)
AND if you're in that situation, it could be that the credit cards, Paypal, etc. will exceed 100% of your reportable income, if they include sales taxes and/or shipping or handling charges, and that depends on the businesses' accounting procedures in place. For example, sales taxes collected might be properly credited/posted to an accrued sales tax account. Likewise, shipping/handling charges might be offset against the related expenses.
This wouldn't be the case with most retailers, even most who take credit cards for most of their sales, as there will always be some consumers who pay by cash or check, for anything. But when IRS sees a business whose sales don't even equal the reported credit card or other online payments, they start to get excited. But, in the situation described, the 1099-K gross proceeds could be as much as 106-110% of actual sales. And that could be correct, but be perfectly innocent.
|Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|