IRS Letter 5042 – Proposed Tax Adjustment
The IRS is proposing changes to your business tax return.
Type of Notice: Return accuracy
Most common tax problem area: Business audits
Why you received IRS Letter 5042
- You received income through a credit card merchant account and/or through other third-party network transactions.
- You filed a tax return reporting business income.
- The IRS thinks that your tax return shows an unusually high portion of gross receipts attributable to credit card payments. The IRS would typically expect a higher portion of gross receipts from cash and checks for your type of business.
- A notice was sent asking you to explain why your gross receipts from credit cards is higher than expected, but you did not respond.
- Letter 5042 was sent to propose changes to your tax return including additional taxes, penalties and interest.
Your options to address IRS Letter 5042
- Dispute the taxes you owe
- Dispute the penalties
Notice deadline: 30 days
If you miss the deadline: You will lose the right to appeal the proposed increase in taxes with the IRS Office of Appeals and the IRS will issue a Statutory Notice of deficiency, which gives you 90 days to petition the U.S. Tax Court.
Want more help?
See your local tax pro for a free consultation.
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