This all started for the 2011 tax year. So, in January 2012, you got a Form 1099-K. But nothing happened. The IRS told you not to change anything in the way you reported. That’s because they weren’t ready with their matching program and their automatic audits.
This year they’re ready. If you get a Form 1099-K, or think you should have, the IRS is going to try to match the form with what you file. Now here’s where it gets tricky.
The matching program is not precise. For example, if you make a bunch of sales at the end of December and then need to wait for them to clear your bank account, it will show on the Form 1099-K, but not in your back account.
The Form 1099-K is also going to show the gross amount you received, without deducting for shipping & handling or for discounts or refunds.
In other words, you’re going to have to reconcile the Form 1099-K to the gross income you report on your tax return.
The IRS has an automatic matching program that they are testing this year. If you don’t match, expect a notice from the IRS. And if you don’t respond, things could get a little tense as they expect to follow up on them all.