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Internet Sales CPA discusses IRS interest in E-Commerce |Audit Technique Guide (ATG) Form 1099-K

interner sales CPA

Gary Bode, CPA: Form 1099-K isn't the only weapon in the IRS' e-commerce arsenal. (910) 399-2705.

Online and Internet sales CPAs have a new source of information on how the IRS audits e-commerce companies. The IRS publishes their own Audit Technique Guides. So, your Internet sales CPA knows what they’ll look for on your tax return and can proactively prevent red flags. And, if there is a red flag, I explain the underlying circumstances. Up to now, States waged the e-commerce war to target internet sales reporting, trying to insure collection of sales and use tax.

IRS Form 1099-K

As an Internet sales CPA, I noted most clients received a Form 1099-K in 2012, which summarized their credit card sales by month. Pay Pal too by the way. The IRS extended deadline for Form 1099-K to 2013, I believe most tax returns will use it in 2013; there won’t be any further extension. Form 1099-K is an income matching document reporting your credit sales to both you and the IRS. Pretty clever, especially when the cost of compliance falls on the credit card companies and Pay Pal.

Other sources of E Commerce Income

As an Internet sales CPA I expect the IRS will also look at:

  • Advertising Income.
  • Internet auctions and bartering. E-Bay has been problematic for the IRS for years.
  • Tip jars. For example, I use Word Press plug-ins on my website. They’re free, but I support them through donations. While I can’t deduct those donations, these small plug-in companies have to declare these donations as income.
  • Sales of Customer lists.
  • Referral fees.

Will there be new questions on your 2012 business tax return?

Probably. Note the IRS now asks if you made payments that required a Form 1099-MISC. This caught some folks taking money under the table as subcontractors. Even if the company doesn’t mind paying under the table, it doesn’t want to commit a felony lying about it. Here are other questions I think the IRS will ask eventually:

  • Unreported income from foreign customers?
  • Advertising income from ads on your site?
  • What other non credit card payments do you accept?
  • What websites do you own?
  • Do you sell items to other online businesses?

I’m an Internet sales CPA that deals with e-commerce. We have a virtual office to serve you wherever you live. For a free phone consult, call (910) 399-2705.

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