Accept Credit Cards? You May Be an Audit Target
If you accept credit cards at your place of business, the Internal Revenue Service may have its eye on you.
According to CNNMoney, the IRS has sent letters to 20,000 small-business owners over the past year to verify that they’ve reported all of their cash earnings on their income taxes. Why? Some $140 billion in taxes go unpaid by small businesses every year, and Uncle Sam wants to collect. These letters are an attempt to do so.
Here’s the deal: Since January 2012, payment settlement entities have been required to report all credit card transactions to the IRS on Form 1099-K. These entities include credit card companies like Visa, MasterCard, and American Express, as well as online merchant processors. For example, PayPal files 1099-Ks for account holders who process more than $20,000 in goods and services sales and complete at least 200 transactions.
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: Accept Credit Cards? You May Be an Audit Target