Posted by: Gary M. Sigman, CPA, MTax, PFS, AEP®
The Internal Revenue Service is at it again.
They are sending out notices to taxpayers who have reported gross sales that they feel are not consistent with the amount of sales that were reported on Form 1099-K. This form was first utilized in 2012, for the 2011 tax year. It's used by payment settlement entities (i.e., credit card companies) to report gross annual payments made to businesses in satisfaction of credit/debit card and other third party network transactions (i.e., PayPal).
Form 1099-K is intended to report gross payments received by a business entity. These gross payments may include not only sales, but sales tax, shipping, and other charges. These other charges may include tips, for a restaurant or bar. As you are probably aware, tips are not counted as income for the business, but, rather, for the recipient/employee.
Learn more about the IRS issuing Form 1099-K here.
If you have questions on this, or any other tax or business related issue, please contact the experts at Zinner & Co.
