IRS Letter 5042 – Proposed Tax Adjustment
The IRS is proposing changes to your business tax return.
Type of Notice: Return accuracy
Likely next step: Address a business audit
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.
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?
Your tax professional can deal with the IRS for you. Learn more about H&R Block’s Tax Audit & Notice Services.
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