Audit risk if salon only claims 1099K, has never claimed cash, and is determining if cash should be claimed

[Golfer2016]

Client's salon has never claimed cash.  She has only claimed income from the credit card income derived from 1099K.  She is thinking about claiming cash for 2017.  However, if she does that, will that create an audit risk?  Or, would it have less audit risk if she just claimed 1099K amount as income because that is what she has done for all of these years?

[abctax55 · Accepted solution]

Audit risk if salon only claims 1099K, has never claimed cash, and is determining if cash should be claimed

Client's salon has never claimed cash.  She has only claimed income from the credit card income derived from 1099K.  She is thinking about claiming cash for 2017.  However, if she does that, will that create an audit risk?  Or, would it have less audit risk if she just claimed 1099K amount as income because that is what she has done for all of these years?

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Audit roulette is not allowed in determining what to claim on a return... and when is cash received for services ever NOT reported ?!?!

I'd be more concerned with tax evasion, fraud, losing my license to practice, going to jail, etc than the "audit" potential.

Any client asking this question in my office would be shown the door.

[TaxGuyBill]

Good idea with copying the original question.

[abctax55]

yup....this ain't my first rodeo :wink:

[slapenta]

Since the IRS knows that this is also a cash business, I would call it an audit risk to NOT claim cash. Client needs to be advised that all income is to be reported.

[IRonMaN]

Holy haircut Batman, but if she is "considering" claiming cash, that means she has been cheating on her previous returns.  Screw the audit risk ---------------------------- run Forrest, run!

[TAXOH]

If I were going to prepare and sign her return she would need to claim all of her income.