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Tax Treatment of Gift Card and Certificate Sales
Date: Wednesday, January 31, 2018
Sponsored by Lorman Education Services
Gain a better understanding of the proper treatment of gift card income and whether you can take advantage of income deferral provisions.
Tax treatment of advance payments has a colorful history in tax cases and IRS guidance. The proper treatment of gift card income and whether taxpayers can take advantage of income deferral provisions for gift revenue has received significant attention from both taxpayers and the IRS in recent years.
There is exciting new guidance on gift cards and revenue recognition, allowing accrual method taxpayers to defer income from gift card sales to a year later than the year of receipt. Gift card revenue is exploding. Total annual volume of gift cards is projected to reach $160 billion by 2018, with only $1 billion going unused.
Since gift cards are being used in many ways, many questions arise regarding the proper treatment of gift card income, further complicated by considerations of when income should be recognized and whether income deferral provisions are applicable. Discuss and consider tax issues for gift cards.
We will review IRS guidance addressing gift cards and taxpayer concerns, including when and whether an accounting method change may be used to change the timing of income recognition associated with gift cards. To be addressed is the limited exception available for coupons issued with sales and the application of this deferral provision following the Capital One decision.
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Stephen B. Jordan, EA
(Not available outside the US)