A new program by the IRS is using data from credit card companies (that started a few years ago) to look for underreporting of cash sales from small businesses. A pilot program of 20,000 letters have been sent to businesses implying that the business has too large of a percentage of credit card sales compared to total reported income and that they must complete a form to explain the “discrepancy”. Although these are not audit letters, they can scare the bejeezees (technical term) out of the business owner. The Service is analyzing the results to fine-tune a much larger future program. Many businesses though, only have card transactions due to the price of their goods/services and have been caught up in the targeting.
Bottom Line: Businesses are expected to have a certain amount of cash sales and will likely to be included in any larger program. SO….always, always, always deposit and report all cash receipts and cash checks later for your personal cash needs. More to come on this one – the Service has called this their “early first steps” in the program.
Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability while bringing his clients Peace of Mind.
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