Recording Paycheck and Gift Cards

Mike or Penny Novack stepbystepfarm at mtdata.com
Mon Feb 1 08:49:11 EST 2010


trythis wrote:

>I would put that gift card balance into asset, as in cash. If you want to
>call it income, but I don't call my birthday presents income and dont report
>them to the IRS.
>
>  
>
The key thing to keep in mind is the purpose for which you are keeping 
books (what information you need)

Let's consider a person for whom "gifts" are a substantial portion of 
what comes in (say significant intra family transfers) but not on a 
scale which has to be reported to the IRS. You COULD ..........

a) Keep more than one set of books.
   That's likely to entail more work entering transactions than you'd 
care for.

b) Split income into multiple sub accounts.
   If it's JUST "income as seen by governments" vs "other income" will 
be easy. In the reports you can get subtotals for reporting purposes. 
But the situation could get very complex with different jurisdictions 
considering different things to be or not be "income" so you need 
several sub accounts. You design your chart of accounts so that you can 
produce the totals needed at reporting time.

Let's take a concrete example. receive substantial amounts coming in 
that are not considered "income". The Feds and your state do not agree 
on what is income and let's say in this case the state is always more 
(say you have pre-tax 401K deductions but the state considers those 
current income).

Income:
     Non-reportable income::
        Gifts:
     Reportable income:
         State:
               Federal:
               State but not Federal:

That would give you the totals you need. But of course the actual 
situation could be much more complicated and then it wouldn't be so simple.

Michael




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