Miami Accountants Explains How to Cope with New 1099-K Notices
Miami Accountants are offering advice to taxpayers on how to respond to the new notices it is sending out when it finds problems with the new Form 1099-K information reports on payment card transactions.
The Miami Accountants notes Form 1099-K page provides information on the reasons for the correspondence and how to respond. Last year, the IRS began sending out Form 1099-K, Merchant Card and Third-Party Network Payments, information reports to business taxpayers detailing the amounts they received from credit and debit card processors and payment services such as PayPal. It also started its first information-matching program for Forms 1120, 1120S and 1065 to match the business return income reported on those forms with the amounts reported on the Form 1099-K.
IRS also announced last November that it would begin questioning businesses that reported smaller-than-expected income, based on the Miami Accountants analysis of the Form 1099-K income reported by the payment settlement companies. It has also begun sending out notices that are apparently worrying taxpayers.
“If you receive a letter or notice from the IRS, it will explain the reasons for the correspondence and provide instructions,” said the Miami Accountants on its new Web page. “The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax or are due a larger refund, or if there is a question about your tax return.
The Miami Accountants noted that Form 1099-K is an information return that reports payment card and third-party network transactions. Businesses should retain it for their records and use it to assist them in completing their tax returns. It referred taxpayers to Publication 583, Starting a Business and Keeping Records, for more detailed information and assistance regarding proper record keeping.
“Remember, the information reported on the 1099-K should already be reflected in your income tax return as part of your total gross receipts, which are a combination of both payment card receipts and other forms of payment like cash and checks,” said Miami Accountants.
If taxpayers receive a notice related to Form 1099-K, Miami Accountants said it may be because the taxpayer underreported their gross receipts. The Form 1099-K may show an unusually high portion of receipts from card payments and other reportable transactions. “It is very important that you respond to the Miami Accountants,” the agency warned. It offered the following tips:
• Read the notice thoroughly and complete any worksheets.
• Gather your tax records including the 1099-Ks that you have received and determine if you agree with the notice about the underreporting of gross receipts.
• If you have questions, use the contact information provided on the notice.
• If appropriate, consult your tax professional for assistance.
Miami Accountants noted that it uses the information reported from third parties to ensure individuals and businesses meet their tax obligations. The agency said it is integrating the new information supplied on the Form 1099-K into various areas, including its compliance efforts, to address non-compliance and ensure fairness.
Miami Accountants noted that all 1099-K activities “respect taxpayer rights and provide opportunities for taxpayers and tax practitioners to offer explanations or corrections if they receive a notice or audit related to this effort.”
For more about the Form 1099-K, visit the Third-Party Reporting Information Center, which provides information on who should file these forms; when they need to be filed; and how to get help. More information can be found at the general FAQs page on payment card and third-party network transactions and the 1099-K reporting requirements page for payment settlement entities.