[IMGCAP(1)]Back in May 2013, I wrote an article for Accounting Today, “Taxing Times for the Restaurant Industry.” References to it popped up in a few blogs and law firm websites shortly thereafter, so it appears someone was reading! In that article, I spoke about Form 1099-K, the IRS-mandated procedure for reports issued by credit card companies to taxpayers that accept credit cards for payment.
Our interest in this was simple. The IRS has a mechanism to compare Form 1099-K to gross receipts and can create audit leads. In the restaurant industry, which I believe is the primary target of this entire 1099K experiment, the same example used in May 2013 works as well today. Let’s say there are two restaurants, located in the same area, both with $1 million in gross receipts: The first has 75 percent credit card sales, whereas the second has 95 percent credit card sales. As a practitioner, which is the “audit lead?” The second, of course.
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