A new requirement is going to give the IRS another tool in finding unreported cash.
The Housing and Economic Recovery Act of 2008 added a requirement for banks and other processors of merchant payment card transactions (credit and debit cards and Internet payments systems) to report a merchant's annual gross payment card receipts to the IRS and to the merchant. The reporting threshold is an aggregate value of third-party network transactions for a merchant of $20,000 or more for the calendar year and aggregate transactions of 200 or more. This reporting requirement is effective for sales made on or after January 1, 2011. The information is to be reported on Form 1099-K.
Now the IRS computers will be able to look at the 1099-K and compare to gross sales to determine cash sales. I would presume that there will be some ratio that they will be using to find “red flags.”
This is something that we will have to watch because of tips that might be run through the credit card and possible cash back.
