Small Business Accounting and Tax Updates
IRS officials are still emphasizing one of their priorities: preventing fraudulent claims for the widely advertised Employee Retention Credit.
Congress’ recent move to shift $21.4 billion in funding away from the Internal Revenue Service as a condition for increasing the debt limit isn’t deterring the tax agency from moving ahead with its strategic plans to hire more employees, improve taxpayer service and modernize its technology, but it could slow down efforts to close the tax gap and audit more high-income taxpayers and corporations.
Douglas O’Donnell, deputy commissioner of services and enforcement at the IRS, announced that they continue to receive numerous amended returns and almost all of them are due to relief programs during the Covid-19 pandemic.
O’Donell went on to emphasize how the Employee Retention Credit is a major issue. Part of this issue is wide variety of people who had no idea about the credit at the time but learned they deserved it and filed amended returns.
While processing them, the IRS discovered many of them were non-compliant and some even fraudulent. The IRS has been working with the Department of Justice to make sure they properly administer that space. In the meantime, the problem seems to be getting more complicated.
O’Donnell has urged all tax professionals to help prevent non-compliant and fraudulent claims by continuing to research and educate their clients on the qualifications for the Employee Retention Credit.
Even though the Form 1099-K reduced reporting requirement for third-party settlement organizations is delayed, some individuals may still receive a Form 1099-K who have not received one in the past.
Some individuals may receive a Form 1099-K for the sale of personal items or in situations where they received a Form 1099-K in error (i.e. for transactions between friends and family, or expense sharing). Money received as a gift or to reimburse shared meals or rent should not be reported on a 1099-K.
Payments should indicate whether they are personal to family and friends or a business transaction for goods and services. If the information is incorrect on the 1099-K, taxpayers should contact the payer immediately.
The payer’s name appears in the upper left corner on the form. The taxpayer should keep a copy of all correspondence with the payer with their records. If a Form 1099-K is received in error and a corrected Form 1099-K can’t be obtained, follow the IRS’ updated guidance at Understanding Your Form 1099-K.
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Munk, C. (2022, July 17). Most small business owners don’t do the math on their most valuable asset. CNBC. Retrieved August 9, 2022, from https://www.cnbc.com/2022/07/17/most-business-owners-dont-do-the-math-on-their-most-valuable-asset.html