With the implementation of its first information return-matching program for business return Forms 1120, 1120S, and 1065, the IRS now matches business return incomes to the total amounts reported on the various information returns. The new 1099-K, Merchant Card and Third-Party Network Payments, will report amounts received from debit/credit cards and third party network payers, such as PayPal. Businesses that claim income that is considerably less than what is reported to the IRS on Forms 1099-K will likely be notified by the IRS requesting an explanation for the deficiency.
The IRS has indicated that notification will occur by letter, either Letter 5035, 5036, 5039 or 5043, and fall under one of three initiatives:
• A soft-touch inquiry that asks taxpayers to review their returns more closely;
• A correspondence audit; or
• An under-reported notice and assessment.
If you receive one or more of these letters, consult a tax professional for assistance.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.