The IRS is cracking down on small business
A recent article on CNN Money found that the IRS is trying to close the gap on unpaid taxes by cracking down on small businesses.
According to the IRS, small businesses account for about $140 billion of the $450 billion that is owed in uncollected taxes. In an attempt to stop those small business owners who are non-compliant, the government sent out 20,000 letters notifying proprietors of “possible income under-reporting.”
The thinking is that if a business’s credit card transactions are unusually high, there may be some unreported cash transactions. To decide who received letters, the IRC compared businesses’ credit card and cash receipts against industry standards.
The problem is that many small businesses are having more online and credit card sales, so simply comparing a business’s credit card receipts to their cash receipts may not be sufficient data for the IRS to send out these letters. They must also account for industry and consumer purchasing trends.
However, the IRS states that its approach is “measured and equitable in several ways, including giving taxpayers the opportunity to explain and fix the errors.”