Short YouTube video by Donna Genie explaining that for cash-basis taxpayers gift certificate sales that are nonrefundable are treated as income when collected, so businesses need not create complex financial liability tracking; instead track outstanding certificates in the point-of-sale (or a spreadsheet) to manage redemptions. The video also contains standard creator calls-to-action (social links, subscribe, contact email).
Foreigners. Let's talk about gift certificate sales. I have seen many people account for gift certificate sales in a way that is harder than it needs to be. So, so let's dive in. First, when you sell a gift certificate in 99% of the cases I see those are not refundable for cash in the eyes of the irs. If you are a cash based taxpayer, which most of you are, then that is income at the moment you collect it as a gift certificate sale, so it doesn't need to be used in order for it to be income to you. The rule of thumb is if those funds are not refundable, they're income at the time you receive them. So there isn't a need to set up in your financial accounting and track how much gift certificate sales were used and outstanding. That's just an overburdening of your accounting system and it's a lot of work for not much. What you do want to do though in your point of sale system is track all of your outstanding gift certificates so that if somebody comes in and wants to use them, obviously you can manage that within your point of sale and use that as a payment method. That will just mean that less cash is coming in the door that day when a gift certificate is used so there will be less income on your financials that day because you didn't collect the cash then. So make this easy on yourself. Just just track your gift certificate sales through your point of sale system or even through a spreadsheet if you like, to show how much you sold, what the value of that gift certificate remaining is and when it's used. Make it easy on yourself. Don't worry about it from the financial side for Taxes, please follow us on Facebook and Instagram. Please make sure to check out our blog and our website link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. You can email me@donnapyopaccounting.com.
