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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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In 2014 I sold tea on Groupon (through a schedule C) and

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Hi there,In 2014 I sold tea on Groupon (through a schedule C) and Groupon is a discount site.I received a CP2000 notice from the IRS saying I owed $7k because my reported income on my schedule C is significantly underreported compared to what Groupon reported in their 1099-k.This is because Groupon reports earnings using the full UNDISCOUNTED retail price and BEFORE counting their commission cut whereas I reported revenue based on the cash that Groupon actually gave me (minus the discount and commission Groupon took).I responded to the CP2000 with a letter explaining the discrepancy and evidence (showing the Groupon contract showing what I was going to earn post discount/commission AND showing the Groupon payment statements to me) but their response was jsut another CP2000, this time for $11k because they added on the self employment tax to the discrepency as well.Not sure what else I can send them to prove it and why they rejected that response. I heard that I might need to amend a schedule C?
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

Thank you for your question. My name is ***** ***** I will be happy to help you today :-)

Expert:  Megan C replied 1 year ago.

Thank you -- do not send an amendment as that will just further confuse the issue.

What you need to do is to show them records - Make a spreadsheet showing the full income, and then show what was deposited into your account if it was just the net amount, or show where you paid groupon.

In the future, to avoid this -report the full amount, and then have an expense to show what you paid to groupon. The issue is simply a computer matching issue, and once you get it situated, you won't owe anything unless you did not previously pay self employment taxes.

There is a 1-800 number on your notice; call that and let them know that you will be sending this back. Make sure everything is as organized as possible.

If they continue to give you headaches, contact your local Taxpayer Advocate. They are the voice of the IRS and are independent of the IRS and are there to help individuals deal with the IRS when the IRS is being too bureaucratic.

Please let me know if you need anything additional. You are right, though - you will be able to deduct the cost of the groupon discount.

Thanks so much, and please rate so that I may receive credit for assisting you today.