The IRS is currently performing a survey of tax preparers regarding the “Tax Gap” from cash files. They want to close the “Tax Gap” by getting taxpayers to report all income from cash.  Their intent is clear:  if your business is not reporting all cash income, you are on their list!  They are considering increasing the fines and penalties for non-reporting by businesses that have paid out cash to “contract help”. Businesses must file a 1099 Misc for all cash payments over $600 per year, and currently the fine for failure to file is $50 per incidence.