Watch Out for Underreporting of Revenues and Taxable Income

Well, not all cash businesses are as bad as ‘Planet Popcorn’ on last week’s episode of ‘The Profit’, with cash stacks lying all over the place, but the IRS is examining about 20,000 small businesses to find out if they’re underreporting revenues and taxable income.

The IRS has the authority to do this as a result of a 2008 law that gave it authority to examine merchant credit and debit card transaction records, and matching that to what is reported on the companies’ tax returns.

The Wall Street Journal article that broke this story says that if the credit card transactions seem ‘unusually large’ percentage of the total, the company might get a letter asking for clarification. There’s no guidance from the WSJ as to what ‘large’ is.

Depending on what is found, the program might be expanded.

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