IRS

IRS Targets Small Businesses for Scrutiny

Tax collectors assume everybody is hauling in bags of cash

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The Internal Revenue Service has sent out letters to 20,000 small businesses since fall 2012, notifying them of "possible income under-reporting."

The IRS says it is trying to identify businesses that get "an unusually high portion" of their reported sales through credit card transactions. The thinking is that a lot of cash transactions might be going unreported.

To decide who gets letters, the IRS compares a business's credit card and cash receipts with industry averages.