It has recently been reported that the IRS is sending out letters to small business owners questioning their efforts when it comes to reporting all of their cash income. While the agency says the letters are simply just asking for more tax information, they are alarming and frightening many small business owners. According to several lawmakers and business owners, the tone of the letters implies that you might have committed some errors and costly mistakes. This can be especially concerning for business owners who work with accountants to ensure that they follow the law.
One of the letters the IRS sent notifies the business owner that “your gross receipts may be underreported” and says they must complete a form detailing why your gross receipts from non-card payments appear to be lower than what was reported. This is a common occurrence for many businesses as it is very hard to match credit transactions with income. While the agency claims it is merely trying to minimize the tax burden for taxpayers and professionals, many small business owners don’t agree with the scare tactic.
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