The Internal Revenue Service has sent out letters to 20,000 small
businesses since fall 2012, notifying them of "possible income
under-reporting."
The IRS says it is trying to identify businesses that get "an unusually high portion" of their reported sales through credit card transactions. The thinking is that a lot of cash transactions might be going unreported.
To decide who gets letters, the IRS compares a business's credit card and cash receipts with industry averages.
One recipient was the owner of a baking equipment supply company (who preferred to remain anonymous). The IRS sent her a letter on May 28 saying that 80% of her $549,955 in annual revenue came from credit card swipes.
"A larger amount of noncard revenue would be expected," the IRS letter warned.
http://money.cnn.com/2013/08/19/smallbusiness/irs-crackdown/
The IRS says it is trying to identify businesses that get "an unusually high portion" of their reported sales through credit card transactions. The thinking is that a lot of cash transactions might be going unreported.
To decide who gets letters, the IRS compares a business's credit card and cash receipts with industry averages.
One recipient was the owner of a baking equipment supply company (who preferred to remain anonymous). The IRS sent her a letter on May 28 saying that 80% of her $549,955 in annual revenue came from credit card swipes.
"A larger amount of noncard revenue would be expected," the IRS letter warned.
http://money.cnn.com/2013/08/19/smallbusiness/irs-crackdown/
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