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New IRS credit card rules problematic, audit reveals

A new plan by the IRS to implement new rules for reporting credit card transactions would cause undue burdens for taxpayers and problems for the IRS, according to a Treasury Department audit.

The IRS wants payments to be reported on Form 1099-K, however, the Treasury Inspector General for Tax Administration said that form may not facilitate a direct match between sales that were reported on 1099-K forms and amounts reported on tax returns, ExecutiveGov.com reports.

The audit also said in its report that the increased volume of information may risk mismatches not being resolved before backup withholding becomes mandatory.

Adequately resolving the mismatches “may take significant resources for the IRS, payment settlement entities, and taxpayers,” according to the audit, he Treasury Inspector General for Tax Administration reports.

“We found that improvements must be made if this effort is to function as intended, which is to help reduce the tax gap,”  J. Russell George, the Treasury Inspector General for Tax Administration, said, according to ExecutiveGov.com.

The IRS did not object to the report, issued on July 26 and published last week, and said that it will comply with its recommendations, including increasing the monitoring of the amounts reported for merchant card payments.

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