Tax treatment of advance payments has a colorful history in tax cases and IRS guidance in recent years. Both taxpayers and the IRS have paid significant attention to the proper treatment of gift card income, including whether taxpayers can take advantage of income deferral provisions for gift revenue. Now, however, 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.
Meanwhile, gift card revenue continues to explode. Total annual volume of gift cards is projected to reach $160 billion by 2019, with only $1 billion going unused. Since gift cards are being used in many ways, there are many questions that arise regarding the proper treatment of gift card income. When should income be recognized? Are income deferral provisions applicable?
In this practical webinar, you will review guidance from the IRS in 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. You will also learn the limited exception available for coupons issued with sales and the application of this deferral provision, following the Capital One and South Dakota v. Wayfair decisions.
Among other things, you will learn about:
- Income recognition rules, IRC §451 and administrative guidance that allows income deferral for advance payments
- The history and development of primary authority
- How to apply advance payment guidance for gift cards
- IRS initiatives designed to address the treatment of advance payments for gift card income
- IRS guidance addressing gift cards and practice tips for implementation
- Gift card considerations and outstanding issues not addressed by IRS guidance
- Examples and Case law considerations
Upon course completion, you will be able to:
- Describe and anticipate tax issues for gift cards
- Recall income deferral considerations
- Determine whether a gift card issuer can take advantage of deferral provision
- Outline accounting method change considerations and strategy
- Identify outstanding issues affecting the treatment of gift cards
- Apply case law that is applicable to gift card accounting treatment
Advanced Preparation: None
Program Level: Intermediate
Field of Study: Taxes, Accounting
Credit Type: Group Internet Based for the Live Program.