IRS Tax Audit Manual for the Retail Gift Shop Industry
IRS Tax Audit Manual for the Retail Gift Shop Industry has been designed to assist the Internal Revenue Service Audit Agent to identify and develop issues specific to the retail gift shop market segment and conduct an examination consistent with other market segment examinations throughout the Service.
The IRS Has Defined YOU As –
The retail gift shop industry includes numerous entities of various sizes that are engaged in the business of selling gifts, cutlery, cookware, novelties, watches, wearable art, decorative accessories as well as seasonal: Christmas, Halloween, etc., commemorative, specialty and collectible items.
The gift-giving industry generally benefits from a healthy economy in which consumers have disposable income available to spend on non-essential consumer goods. As a result, there have been new entrants into the industry including:
- Individuals who have worked exclusively as employees in the retail gift shop industry who begin their own business
- Hobbies that evolve into businesses
- Retirees who begin their own business
A leading research company estimated that U.S. retail sales of giftware have risen to $10.9 billion last year, and will continue to increase annually. However, geographic location seems to have substantial impact on profitability (high tourist areas seem to be the most profitable).
Take a FREE sneak into just a few more aspects that the IRS knows about the Retail Gift Shop Industry – you may be surprised –
- A gift shop taxpayer will be required to use the accrual basis of accounting for income and expenses with regard to industry
- The most valuable asset of a retail gift shop is inventory
- Generally, smaller retail gift shops use either the cost method or the lower of cost or market to determine the value of inventory. Larger shops use the retail method.
- The area of gift certificates and credit vouchers (issued in place of a cash refund) is one where an examiner may find the retail gift shop deferring income beyond the point where it should be reported.
- Accounts of retail gift shops should be analyzed to determine whether the retail gift shop under examination has service departments and, if so, how income and expense is booked.
- Both income and expenses should be treated as past of the cost of sales calculation
- Consignments of merchandise to others to sell are not sales since the title of merchandise remains with the consignor
- AND THERE’S MUCH, MUCH MORE…
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The MANUAL written specifically for Internal Revenue Service Audit Agents to use while conducting audits of the Retail Gift Shop Industry.
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DON’T FORGET – The IRS Tax Audit Manual for the Retail Gift Shop Industry is tax deductible as a business expense