Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
IRS Begins Crackdown of Small Businesses
Author: Scarinci Hollenbeck, LLC
Date: September 13, 2013
Key Contacts
Back
Small businesses may face increased scrutiny from the Internal Revenue Service, which recently announced that it believes small companies may be under-reporting cash payments.
Resulting from the possibility of many small business audits in the future, the agency recently sent out 20,000 letters since fall 2012, notifying owners of “possible income under-reporting.” The IRS said it sent out these letters after examining the credit card transactions of a large number of small entities across the country. After its analysis, the tax agency said it is now trying to identify companies that receive an “unusually high portion” of reported sales through credit card transactions and may be under-reporting cash payments, CNN Money reports. The IRS is essentially targeting companies whose ratio of credit card to cash seems unusual for their industry, the news source added. The possible impending small business audits has owners and entities worried.
“You received one or more of these letters and notices because you may have under-reported your gross receipts,” said the agency. “This is based on your tax return and Form(s) 1099-K, Payment/Merchant Cards and Third Party Network Transactions that show an unusually high portion of receipts from card payments and other Form 1099-K reportable transactions.”
Business owners who receive the notices are typically given 30 days to respond in the way of a written explanation. However, many company owners are unsure of how to respond to the alleged tax law violations, with many asserting that they have accurately reported all income. In addition, many business owners argue that the IRS cannot accurately ascertain whether businesses are in compliance with tax law simply by relying upon industry averages, rather than concrete evidence of wrongdoing.
However, it is unclear if the IRS will seek out new barometers to measure compliance as it attempts to close the multibillion-dollar tax gap, $140 billion of which is attributed to noncompliance by small businesses.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
What Every Real Estate Investor Should Know Before Buying a Rental Property
Before buying a New Jersey rental property, an investor should verify realistic operating numbers, the property’s legal and regulatory status, lead-based paint and flood compliance, the existing leases and tenant protections, and the right ownership structure. A rental property is more than a piece of real estate; it is an operating business subject to legal, […]
Author: Donald M. Pepe
Can You Change an Irrevocable Trust in New Jersey?
In New Jersey, an irrevocable trust can sometimes be modified even though its name suggests otherwise, and one of the primary tools for doing so is a process called decanting. Whether decanting is available depends on the specific terms of the trust and the discretion given to the trustee. Key takeaways: New Jersey has no […]
Author: Marc J. Comer
How Intellectual Property Valuation Will Impact Business Transactions
Intellectual property valuation determines the monetary value of a business’s IP assets, and it drives outcomes in licensing deals, joint ventures, mergers and acquisitions, financing, and ownership disputes. The most valuable assets of a business are often the things that cannot be seen or touched: a proprietary process, a copyrighted work, brand recognition, or the […]
Author: Jay McDaniel
Data Center, Dark Fiber, and Lit Services Agreements in New Jersey: Key Terms and Legal Pitfalls
For New Jersey data center owners and operators, a service agreement may look routine when it is signed. The network is functioning, the vendor is meeting its installation schedule, and the parties have agreed on pricing and performance specifications. The provisions that seem most important at that stage are often the technical ones. That changes […]
Author: George McGowan
Fort Monmouth Redevelopment and the Transformation of Monmouth County Real Estate
The Fort Monmouth redevelopment has entered its execution phase, and it is repositioning the broader Monmouth County real estate market. When Netflix and the Fort Monmouth Economic Revitalization Authority closed on the 292-acre Mega Parcel in December 2025, the transaction did more than hand over a deed. It marked the moment Fort Monmouth stopped being […]
Author: Donald M. Pepe
Local Zoning and Land Use Rules Every New Jersey Rental Property Owner Should Understand
Owning a residential rental property in New Jersey involves more than finding tenants and collecting rent. Property owners must comply with a combination of state laws, municipal ordinances, building and housing codes, and zoning and land use regulations. These requirements can affect everything from the number of dwelling units permitted at a property to whether […]
Author: Donald M. Pepe
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.