<prompt> Human: I will try to keep this as brief as possible because no matter how much I write, I expect there to be questions about details I may miss. I received a letter from the IRS stating that I owe them 19,700. 16k is tax they say I owe. 3.2k is labeled as, Substantial tax underpayment penalty, and the rest is listed as interest.They have indicated that the reason for the tax request is from Paypal reporting around 60k in transactions for the year that I did not show properly on our taxes. Here is what happened, the reason for the mixup, and a bit of info to help get me hopefully pointed in the right direction.I work for a company in China that does tens of millions of dollars. I know the owner of the company personally and have been working with him for a few years. The system we work with goes like this: 1. They sell something from China to the US through Amazon, eBay, their direct website, etc. 2. If the customer does not like it, finds a problem with the item, or simply decides they want a refund they send it to my address. This information is given to USA customers by any number of the 20 support staff we have. It all comes to me. 3. When I receive the items, I check them to see if they work as they should, if they are in good or perfect condition, and then I repackage to look brand new and sell them as usedrefurbished. 4. When the item sells at a market discount, that money builds up in a Paypal account. 5. Every 1st and 15th, I would transfer 2k salary from Paypal directly to my bank account. 6. How the HELL do I classify this in a way that significantly reduces this number that the IRS thinks I owe them?As an example, an item would be sold for 100. It would then be returned to me and China would issue their refund. Now, it becomes expensive to send this merchandise all the way back to China and pay import fees for each item. Because of this, it makes more sense for me to resell the item in used like new condition for 85-88 and it saves the company money as the returns and resells add up. At certain times throughout the year, I would take maybe 400 or 500 and send a bulk shipment back to China all at once and that also was paid for out of this company account.The catch is, the Paypal account is in my name and there is no set cost on any item. Once I sell it, that becomes the cost, because I pay myself salary On behalf of my company from the proceeds.In other words, I am not selling a 0 cost item and making 88. I am selling that was sold once at retail, returned, and then sold again in the secondary market. By the time shipping fees, paypal fees, and ebay Amazon fees are taken out approx. 16-22 I end up with an item that has returned 65 or so...which is the cost of the item to manufacture and buy in the first place.All the company owner is doing is trying to turn the inventory for the sake of numbers so that he can get better pricing with his local factories...and now somehow Im on the hook for nearly twenty large.Assistant: Hand that letter to your boss. Tell him he owes the IRS. Then change the way the PayPal account is set up. Human: Thats not the best approach, because the IRS is calculating the tax on the worst case scenario filing situation, counting all of the reported PayPal payments as income, even though some of it is not income. OP needs to work with the likely 1099-K that he received and file an amended return with the IRS.Assistant: I believe this is ultimately going to be my first actual action in the direction of the IRS. I dont have money for a tax attorney so Im going to have to figure out how to manage that situation. You see I made 48k, married, house, 2 kids, 2 vehicles. I dont think the tax attorneys in California will take my case for the leftover 47.53 I have at the end of the year.  <response>: See if the owner of the company will foot the bill for the CPAtax attorney since you did this out of convenience for both of you and Im sure he wants to keep you around. Lot cheaper for everyone. 