Jeremy/Bonnie Hellman on fri 3 feb 06
Hi Clayarters,
Linda makes a good point here. If the person using his/her credit card
account for other peoples' sales were my client, I would advise him/her to
get a letter from the organizing person, or officer of the group. This
letter would say: Thank you for allowing us to use your credit card machine
for our group sales. We note that sales tax collected is included in gross
sales reported to the credit card company.
If the information is available, the letter should go on to say: Our
records indicate that total sales were $ XX,XXX and your sales were $ YYY.
However, I would have my client show the sales at gross on the Sch C or
whichever tax form is being used, and show the amounts paid out as Refunds
or Returns on the Sch C. I would also watch that credit card fees reimbursed
are also included as a reduction of credit card fee expense on the return.
In some parts of the USA, there are taxes on gross receipts and this is the
only place where the client might have problems with a tax audit where the
client used the business credit card machine for other peoples' sales and
recorded the sales at gross.
In general, it's a good thing on a tax return to show gross income, and not
net out the income. Deposits/sales on a tax return should match the bank
deposits. Non sales deposits should be adequately documented (and there are
a number of ways to do this).
My view is that the individual using his/her own credit card account is
potentially making a lot of extra work for him/herself. It could get even
uglier if any charges are disallowed after the day of the group sale.
Bonnie
Bonnie D. Hellman, CPA in PA & CO
Accepting a few new tax clients this year.....
> Quoting Linda Ferzoco :
>
>> Hi Judy,
>>
>> I was thinking that the person whose account takes all of the credit
>> card
>> charges might one day have to talk to the IRS about all that unclaimed
>> income! So, it seems to me that you'd have to have a bullet-proof way to
>> show whose sale each is.
>>
>> I'm not bringing this up out of total paranoia. They don't check every
>> charge receipt (although in an audit they could), but I do know that in
>> restaurants for instance, they take an average of the tips given for all
>> charges and assume that each server gets that percent tip! It's why I
>> always
>> give the tip in cash if I can.
>>
>> Linda Ferzoco
>> Pacifica, CA
>>
>> BTW, note new address. Too much spam (hundred or more each day), so I
>> started a new account, used for Clayart only. Took the @$%^%$^**$#$&^
>> spammers two days to find me and this addy hasn't been posted on any
>> website
>> yet. Ph _ _ ck phishers.
>>
>> This is a disposable account from Yahoo. When they find this one, I can
>> delete it and start another disposable account. Real address now is:
>>
>> lindaferzoco (insert address symbol) yahoo.com
>>
>>
>> Judy Musicant wrote:
>>
>> >Hello Potters,
>> >
>> >My guild is thinking about taking credit cards for purchases at our
>> >group
>> shows. Up until now we've only taken cash and checks, and we're trying to
>> increase sales. Payment is made centrally for all purchases. As we are
>> not a
>> formal business entity of any kind, I gather that one of us would have
>> the
>> contract with the credit card company. In other words, we'd all be using
>> one
>> person's card processor. We would not be adding on sales tax at the point
>> of
>> purchase, as each person's pots include tax and they are individually
>> responsible for remitting sales tax to the state. Has anyone had
>> experience
>> with a group of this type using credit cards in this manner. If so, did
>> you
>> notice a measureable increase in sales? Thanks for any input.
>> >
>> >
>>
>> --
>> Des & Jan Howard
>> Lue Pottery
>> LUE NSW 2850
>> Australia
>> Ph/Fax 02 6373 6419
>> http://www.luepottery.hwy.com.au
>>
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>> ______________________________________________________________________________
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>>
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>>
>
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