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Tuesday, September 30, 2014 - 7:46am

IRS cracking down on small businesses

IRS cracking down on small businesses
MGN ONLINE
News
Monday, August 19, 2013 - 12:25pm

Your credit card swipe at a local business could cause some tax headaches for the business owner.

The IRS is cracking down on small business who receive an unusually high portions of their sales through credit card transactions.

Since Fall 2012 the government agency has sent some 20,000 small businesses a letter alerting them to possible underreporting.

The thinking behind this is that those businesses may not be reporting all of their cash transactions.

By law, credit card processors are required to file 1099-K forms, that's a record of all credit card transactions on their systems.

The IRS compares a business credit card and cash receipts to industry averages to determine who gets a notice, but critics argue this is not a good measure of a business' revenue.

They point to changes like online shopping with credit cards as proof of this.

In a written statement, the IRS says their goal is to ensure that everyone obeys the law.

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