kcjenkins Posted January 21, 2013 Report Share Posted January 21, 2013 http://www.accountingtoday.com/ato_issues/27_1/Red-letters-65103-1.html?ET=webcpa:e6585:125313a:&st=email THE NOTICES TO EXPECT As part of this initiative, the IRS created four new letters that question business returns with possible unreported income, based on a Form 1099-K analysis. These letters question the accuracy of your client's return. Each letter provides information on the reported gross receipts on the return, as well as the total amount for Form 1099-K payments received. The letter will also provide information on the specific Forms 1099-K filed on your client's business. If your client receives Letters 5035, 5036, 5039 or 5043, Notification of Possible Income Under-reporting, they may have under-reported gross receipts. The IRS compared the amount in gross receipts reported on the return to the amount in receipts from merchant card payments on Forms 1099-K. Based on the IRS's analysis of your client's industry (presumably using the merchant category code on Forms 1099-K), the IRS thinks that your client may have more income than what is reported on the filed return. Depending on the letter, your next steps vary. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted January 21, 2013 Report Share Posted January 21, 2013 The 1099-k is a disaster, for example if you own a restaurant and most of your sales are credit cards sales and there are tips, your 1099-k will show the tips as part of the monthly gross sales. What do most restaurant and employees do? They don't report tips therefore there is a discrepancy between the tax return and the 1099-k. Well times have changed. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted January 21, 2013 Report Share Posted January 21, 2013 None of our clients have received the letter so far. However, I would love to see an example of the letter so I can be prepared when/if one of our clients receives one. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 21, 2013 Author Report Share Posted January 21, 2013 Here is a link to an article with more detail on how to respond to each of the letters http://www.accountingtoday.com/ato_issues/27_1/Red-letters-65103-1.html?taxpro Quote Link to comment Share on other sites More sharing options...
Jerryhill Posted January 21, 2013 Report Share Posted January 21, 2013 Are you all staying with ATX this year. Or have you been successful in networking the 2012 program? Quote Link to comment Share on other sites More sharing options...
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