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Retailers: IRS Loosens Gift Card Requirements
Retailers gained a major victory this month when the IRS announced that proceeds from the sale of gift cards does not have to be counted as taxable income until they are redeemed even if they were sold through a subsidiary or franchise.
Retailers who issue gift cards in place of refunds may also defer any income associated with the original sale.
This means that any money received as the result of the sale of gift cards need not be declared as long as those gift cards can be redeemed for merchandise from the company that issued them.
As a reminder, you should check all the facts with your Accountant or CPA.
Sources: National Retail Federation, Accounting Today
New Credit Card Laws May Mean Less Profit for Retailers
Under the new credit card laws, the government is removing some of the advantages for businesses that accept credit cards.
It used to be that retailers were unable to to offer discounts to customers using cash. Under the new laws, retailers may offer a cash discount for those customers who do not use a credit card. This means that many retailers will start offering anywhere from 2 to 10% discounts to those customers who choose to pay by cash.
What does this mean to you, the business owner?
Negative Signs Create a Negative Impression
The other day we went to our favorite restaurant for lunch. Both the food and the customer service is great. The prices are good and the store is always spotless. They have all the things that keep people coming back again and again.
Except for one thing.
When you are entering the front door of the restaurant, there’s a large sign that reads, “NO Public Restrooms.” Right there, above the door handle. It’s the very first thing you see as you enter the building.
Is this really a good idea? I’ve got to say, I find that sign to be something of a turn off. That sign irks me just enough that it has a negative impact even though I already know that, based on past patronage, my eating experience is going to be a good one.
Credit Card Receipts to be Reported to IRS
Proposed IRS regulations address reporting requirements for credit card and third-party network transactions (IR-2009-106; NPRM REG-139255-08). The IRS plans to require credit card and other firms that process transactions to report the annual gross network transactions to participating merchants and to the IRS.
Information reporting will begin to apply to 2011 transactions. Form 1099-K has been proposed for this purpose and is now available in draft form. Form 1099-K will be prepared for each calendar year and report the gross amount of transactions for the year and for each month of the year. The inclusion of monthly amounts on the return filed with the IRS and the copy furnished to the payee will help fiscal-year payees reconcile payment card and third-party network transaction receipts.
The gross amount of a transaction is not reduced by fees, charge backs, refunds, or any other amount. The IRS will use the reports as it does W-2s and 1099s. A company reporting gross receipts different from those in these reports can be subjected to auditing to explain the differences.
New 1099 Requirements Coming
To narrow the federal deficit, the IRS plans to add new 1099 reporting requirements, according to a report from the American Institute of Professional Bookkeepers.
These include:
- Payments to corporations would require a 1099 when they exceed $600 annually.
- Independent contractors would be subject to withholding if they do not provide a valid TIN—i.e., employers would have to verify TINs.
- Landlords would have to file 1099s on payments to service providers such as plumbers and carpenters.
