The Treasury Inspector General for Tax Administration (TIGTA) recently reported that small businesses and merchants who make use of platforms like Uber or Etsy are not properly reporting their income. This accusation is supported by discrepancies that were found between numbers filed on Form 1099-K and individual tax returns. These discrepancies are likely to trigger audits to dig into the issue.
What were the discrepancies? As noted, the issue involves income reported on Form 1099-K and individual tax returns. Form 1099-K, the Payment Card and Third Party Network Transactions Form, is used to report payment from card transactions like credit cards, debit cards and stored-value cards like gift cards.
How big are the discrepancies? According to a recent report by Accounting Today, the discrepancy is pretty big. 20,881 taxpayers were off by $10,000 or more between these two forms. As such, the TIGTA has called on the Internal Revenue Service (IRS) to conduct audits to dig into the discrepancy.
Who is impacted by this issue? This issue involves those who receive payments from credit cards, gift cards or debit cards. Merchants with PayPal accounts are a specific example. Additional examples include entrepreneurs who operate using eBay and Etsy.
What if I get notice of an audit? It is important to operate your business in compliance with tax laws. An appointment with an attorney experienced in the laws that impact the self-employed can help. This legal professional can review your situation and provide guidance to help better preserve your business interests.