I just received a note from the IRS stating that GroupOn reported $44,000 on their 1099-k form, but I only claimed $33,000 because that is what I received in my bank account. Now the IRS wants to tax me on that $11,000 difference. But is that correct? Or do I need to contest this alteration and send them my 1099k and bank statements?
You needed to fill out schedule C with the full gross income on line 1 then enter all the expenses. The 11,000 is probably for Commissions or fees, etc? Ask the IRS if they want you to amend. It shouldn't change your Net Profit or Loss on Schedule C.
Basically, the IRS doesn't care what's in your bank account. Groupon reported to the IRS that they paid you $44,000. But *you* reported to the IRS that you only received $33,000. So it's apparent that you did not report to the IRS what was on the copy of the 1099-K you received, and that's your boo-boo.
You need to report *ALL* of your business income from *ALL* sources on SCH C as a physical part of your personal 1040 tax return. On that same SCH C you will also report all of your business expenses (which I assume account for the $11,000 difference) and those business expenses are then deducted from your taxable business income.
This late in the game I highly suggest you seek professional help, as it is my impression that you really don't know what you're doing. Now there's nothing wrong with not knowing. It's not like you learn this stuff through osmosis. But *your* current learning process will $cost$ you significantly more than what you will pay for professional help. On top of that, if your state also taxes personal income you can expect a letter from your state taxing authority assessing state tax on that $11,000 difference. So for the sake of your own wallet you need to seek professional help yesterday, if not sooner.
I couldn't disagree with you more. You're advocating the commission of fraud. Groupon sends 1099K's with inexplicable numbers. So you understand: groupon sells coupons on your behalf, payment is made to groupon, the coupons are redeemed in your business. Groupon then sends you approx. 50% of the proceeds. So, if they sell 100 $50 coupons, you SHOULD receive approx. $2,500. But it's more complicated than that. They sell coupons, then people get refunds - as the merchant you have no idea, never saw any money, never refunded any money, nothing. Then they pay 80% of your take at 30 days, then the remaining 20% six months later. Then they don't pay you unless a coupon is redeemed, so you have say 25% of sold coupons where Groupon is sitting on the full amount, and you never receive payment. So, at the end of Jan, you get a 1099k from them for $5,700 (the sold 114 coupons, refunded 14 of them, 25 of them were never redeemed at your business). You look at payments received from Groupon in your bank account and it's showing $1,700. Any accountant that tells me to just trust Groupon and report $5,700, then make up deductions to get numbers to match is OUT OF HIS/HER MIND.