IRS is telling me they want tens of thousands of dollars in tax for 2015.<p>Up to 2015, I operated a credit card merchant account (First Data) where I would process event ticket sales on behalf of clients, and ACH transfer them their funds. Of the money processed, perhaps 3% is income. I no longer do this model (for many reasons) and use Stripe instead.<p>Naturally, First data sent me a 1099 saying I made a bunch of money. IRS knows that. I don't report 1099's on my returns directly, because I have an accounting system that includes all of that income.<p>So clearly, I can explain to a layman why this money is not income, but what is the proper way to respond to this letter and prove it, hopefully avoiding an audit?<p>Thanks.
CP2000 doesn't mean all of that is income, part of that money is expense, so FD will tell IRS say you made $50,000. Then you need to say 97% $48500 is expense and pay tax on $1500. Have your records ready if you get audited. You can't avoid getting audited. Best assume you will get audited and be ready.