The U.S. underground economy recently came a bit more out of the shadows. In 2012 - the IRS made the 1099-K form a requirement of credit card companies who do business with contractors. No longer could "cash" businesses - which the IRS truly doesn't audit frequently - use a limited IRS paper trail as an excuse not to report gross revenues on their tax returns - (or file a tax return period). If you sell stuff on ebay or processed payments on a credit card, you can no longer be complacent about filing a tax return.
A client of ours - who hadn't filed tax returns in 15 years...received their first 1099-K in 2011 and for 2012 and 2013. We are doing their 2011 2012 and 2013 returns. We are telling the client to file these returns and pay what they owe including a bit extra for penalties/interest. Should the IRS start asking for 2010 and older returns - we'll do them as well.
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