1099-K / Gross Sales

[Sarypion]

When 1099-K includes sales tax and tips, do you report the 1099-K amount as "Gross Sales" on the corporation tax return?

I read another post with a similar situation (http://www.atxcommunity.com/topic/18997-underreporting-boo-boo/?tab=comments#comment-139212).  And someone suggests to include sales tax and tips.

I think this would probably avoid attention from the IRS, but is it the right thing to do?  Doesn't the tax return instruction say not to include sales tax and tips?

What about when you are preparing, say, Form 8027?  Do you match the corporation tax return's gross receipts amount, or use the real gross receipts?

[Sarypion]

Sorry , when I wrote "is it the right thing to do", I really meant "is it the best way to avoid any kind of problems".

[Abby Normal]

I've never had 1099Ks that add up to more than sales per the businesses books, due to sales that aren't on a 1099K, but if that ever happened, I would report the 1099K total and back out the difference somewhere.

You should be our test case to see if the IRS is even matching 1099Ks. My guess is that they are not.

[jklcpa]

Agree with Abby. The most important thing is to make sure the business is reporting all income, and unless the business does 100% of its business with this one credit card processor, Paypal, Amazon, etc, then it is hightly unlikely that there aren't sales using other payment methods.

I don't think the IRS ties these in and would be very difficult because, not only does the form include sales taxes and tips, it also includes cash back to customers that use a debit card at checkout. Sounds like a reconciling nightmare to me. 

[SaraEA]

We have had a number of audits when the 1099-K was lower than the reported sales, so I believe the IRS computers are matching.    Enter the cash back as a negative number, and list the sales tax on the taxes paid line.

[Richcpaman]

5 hours ago, Abby Normal said:

I've never had 1099Ks that add up to more than sales per the businesses books, due to sales that aren't on a 1099K, but if that ever happened, I would report the 1099K total and back out the difference somewhere.

You should be our test case to see if the IRS is even matching 1099Ks. My guess is that they are not.

The IRS IS matching the 1099K.  I have seen the notice and written the response.  Weird situation, federal sales were for a Subsidiary.  Reported under EIN #1, but belonged to EIN #2.  IRS asserted Tax on C-Corp for not reporting all its sales.   

Rich

[Sarypion]

15 hours ago, Abby Normal said:

You should be our test case to see if the IRS is even matching 1099Ks. My guess is that they are not.

Unfortunately the IRS seem to be matching 1099Ks, just not accurately.  I've read somewhere that the IRS deducts what they "believe" is the sales tax and tips, then issue letters/audits.  I have a client who is being audited for 3 years because of the mis-matching.

Thanks for all the inputs.  I've decided to add sales tax and tips, then deduct them as expenses.  Let's see how it goes.

What does everyone think about the second part of my question?  Let's say, the corporation tax return is calendar-year, would you report everything calendar-year using the same sales amount?  Just to be consistent?