The Internal Revenue Service has eliminated the requirement regarding how credit -and debit card payments are accounted for on tax returns.
The IRS would have required companies to explain the differences between the 1099K numbers and their own internal records on their tax returns. This new process was an attempt to increase voluntary tax compliance, improve collections and thereby reduce the tax gap. The IRS action was a clear response to the outcry from small business owners. Therefore, the IRS has announced that it has no intention of requiring reconciliation, either in 2012 or in future years.
Company financial managers may have to change the way they keep records because payment processors will continue to submit 1099K forms. The variance between gross receipts on merchant tax returns and the numbers on payment processor forms could raise red flags and possibly trigger an audit.