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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 585
Experience:  10 years experience
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Nguyen 2205-A gross receipts or sales issue, I got a 2205-A

Customer Question

Nguyen 2205-A gross receipts or sales issue
JA: Thanks. Can you give me any more details about your issue?
Customer: I got a 2205-A from IRS asking for audit the issue on their letter is my Schedule C1- Gross receipts or sales I did tax myself that year and I wonder if this could be a red flag got 1099-K from creditcard processor around 600k filed a 1095 and issued back about 325k to contractors via 1099 MISC's
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Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
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Expert:  R. Klein, EA replied 1 year ago.


Frequently an audit of this nature is triggered by a discrepancy between what you reported on your return and what third parties report on the 1099's sent to the IRS.

Sometimes this can be caused by duplicate reporting requirements, and other times it can be due to your accounting method. If the IRS receives 1099s totaling 1 million dollars paid to you and you report only 650,000 in gross sales, this would be a problem.

Expert:  R. Klein, EA replied 1 year ago.

Certainly if you had 650K in payments reported to you from the credit card processor and you show on your return that you received only $500K in sales, this is a problem.

Be aware that once the IRS opens an audit case, almost every time they start probing into other areas of the tax return. They are not limited to auditing just the one item the letter mentions. For this reason, it is often wise to hire a representative who understands how to manage the examination.