We’ve done our best to keep you up to date on the 1099-K, the form the IRS now uses to track money earned through online payment processors. Today we have some different news regarding the 1099-K – or rather how seriously the IRS is taking it!
Beginning today, approximately 20,000 letters will be sent to small businesses across America. These letters will inform the owners that there is some form of discrepancy between how much they made in the taxable year versus how much they reported. This was the precisely the reason the 1099-K was invented, and it looks like the IRS is taking this very seriously.
However, this isn’t the time to panic. Twenty thousand letters is a relatively low number compared to the number of taxpayers in the country, so you more than likely will not be getting a letter in the mail.
If you do, it’s still no time to freak out. There are 3 possibilities the IRS letter could be:
• Letter of inquiry
• Correspondence audit, meaning they think you’ve underreported your income
• CP2000, a confirmation there is a discrepancy and you need to explain the issue at detail
If you do get one of these forms, make sure to follow all the directions on them. If you have absolutely any question at all, call the number on the form to clarify. Also try to remember you’re not automatically going to be paying a zillion dollars out of pocket or anything at all. The IRS is still ironing out the kinks and it could be a misunderstanding!