IRS reverses course on reconciling gross receipts with 1099-K forms. 

Businesses won’t have to separately report amounts sown on 1099-Ks on a special line on Schedule C on forms 1065, 1120, and 1120-S after all.  The Revenue Service had waived separate reporting for gross receipts for 2011, but firms squawked about the added work involved to reconcile the 1099-K data with their own recordkeeping systems.  So IRS waived the requirement permanently.  The Service had hoped to match amounts listed on 1099-Ks directly with return, making discrepancies easier to spot.  This decision will make the 1099-Ks less useful in uncovering businesses that underreport income, and will give more ammunition to critics in Congress who want to repeal the reporting requirements altogether.

Tax-exemption groups will get extra audit scrutiny from IRS on several fronts:

  • Unrelated business income.  Groups that listed unrelated business activities on Form 990 will hear from the tax man if they didn’t also file Form 990-T with IRS
  • Political activity.  With a presidential election coming up later this year, agents will be more watchful for impermissible intervention in political campaigns.
  • Labor unions, business leagues and organizations promotion social welfare.  These groups can declare themselves to be exempt without seeking a letter from IRS.  Now the Service has decided to send out questionnaires to check their compliance. 
  • Upper-incomers will continue to feel audit heat in 2012.  As we reported in January, IRS statistics show that people with income of $200,000 or higher has an exam rate of 3.93% in 2011.  And one in every eight millionaires was audited.  IRS officials now say that examinations of filers will incomes of at least $200,000 will be a priority this year.  Other areas that are signaled out for special attention: filers with abusive transactions, such as inflated business deductions, sham losses and false 1099-OID forms.  And visits to return preparers to check on compliance.

Please contact us for a free proposal.

No related posts.

Leave a Reply

Your email address will not be published. Required fields are marked *


26 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>