Transparency is the New Black: If you are business that deals in credit cards, the IRS now demands you line up the numbers for them!

Have you heard of a 1099-K? If your small business accepts credit cards, or even if you have sold some of your wares online and receive credit card income that for whatever reason does not show up similarly on the tax return that you send to the IRS, you are going to find out what a 1099-K is pretty soon.

The IRS has charged credit card companies with sending out a 1099-K to its merchants, with the aim of accounting for the multibillion-dollar tax gap - that is, the gap between what the IRS claims they are owed based on their consumer income estimations, and what they actually receive in payment from taxpayers.

These 1099-K's have been termed "mismatch notices," because the numbers usually just don't line up. It is too labor intensive and a general waste of time for the IRS to attempt to do the work themselves, to match credit card income on tax returns to 1099-K reports. This is because many merchants have special arrangements, such as cash-back offers, and other deals where they are paying back out portions of their gross income to consumers. For these reasons and others, marketplace credit card receipts don't always match with credit card income reported on individual and business tax returns.

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