IRS Reverses Credit Card Rule Tax Reg

Merchants do not include things like cash refunds, sales tax, and tips in their gross receipts, but payment processors could include those figures on 1099-K forms. (Photo Credit: office.microsoft.com)

The IRS announced on March 1, 2012 that it has decided to reverse its decision to require business owners to reconcile their gross receipts with their 1099-Ks reported by payment processors.

According to the IRS, the original goal of the Tax Reg was to increase voluntary tax compliance, as well as, improve overall compliance, but many small business owners had criticized the rule. Merchants do not include things like cash refunds, sales tax, and tips in their gross receipts, but payment processors could include those figures on 1099-K forms. Small business owners were concerned about the extra administrative time and expense required to reconcile the two numbers.

Payment processors will continue to file Form 1099-K, so don’t let your guard down. The discrepancy between gross receipts and Form 1099-K could still trigger an IRS audit.