Piercy Bowler Taylor & Kern
LATEST NEWS
Two PBTK Auditors Earn CPA License, Promoted to Manager

January 23, 2017– Piercy Bowler Taylor & Kern (PBTK), a full-service accounting firm, announces that auditors Drew Ferguson and Kyle Foutz have earned their Certified Public Accountant designations and both have also been promoted from Audit Senior Associate to the position of Audit Manager.

Ferguson has been with Piercy Bowler Taylor & Kern since July 2012 and he could eat sushi for every meal for the rest of his life. He completes audit, review, compilation, and other attest services for a wide range of clients in government, gaming and non-profits.

Foutz has been with Piercy Bowler Taylor & Kern since August 2013 but he also lived in the Amazon rain forest. He is involved in testing the effectiveness of internal controls relating to compliance with the Minimum Internal Control Standards instituted by the Nevada Gaming Control Board, in addition to auditing and reviewing companies in a variety of industries.

About Piercy Bowler Taylor & Kern

Piercy Bowler Taylor & Kern is a full-service accounting and business advisory firm that provides accounting and auditing, tax, consulting, valuation and litigation support services. Founded locally in 1990, the firm specializes in the casino gaming and leisure time industries, governmental and not-for-profit organizations, real estate development and construction industries and the legal and general business communities. Now with offices in Salt Lake City, Reno and Las Vegas, PBTK is one of the few independent accounting firms in its local markets to perform SEC audits. For more information on PBTK, visit pbtk.com or call Shannon Hiller at 702.384.1120.

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Can You Defer Taxes on Advance Payments?

Many businesses receive payment in advance for goods and services. Examples include magazine subscriptions, long-term supply contracts, organization memberships, computer software licenses and gift cards.

Generally, advance payments are included in taxable income in the year they’re received, even if you defer a portion of the income for financial reporting purposes. But there are exceptions that might provide you some savings when you file your 2016 income tax return.

Deferral opportunities

The IRS allows limited deferral of income related to advance payments for:

  • Goods or services,
  • Intellectual property licenses or leases,
  • Computer software sales, leases or licenses,
  • Warranty contracts,
  • Subscriptions,
  • Certain organization memberships,
  • Eligible gift card sales, and
  • Any combination of the above.

In the year you receive an advance payment (Year 1), you may defer the same amount of income you defer in an “applicable financial statement.” The remaining income must be recognized in the following year (Year 2), regardless of the amount of income you recognize in Year 2 for financial reporting purposes. Let’s look at an example.

Fred and Ginger are in the business of giving dance lessons. On November 1, 2016, they receive an advance payment from Gene for a two-year contract that provides up to 96 one-hour lessons. Gene takes eight lessons in 2016, 48 lessons in 2017 and 40 lessons in 2018.

In their applicable financial statements, Fred and Ginger recognize 1/12 of the advance payment in their 2016 revenues, 6/12 in their 2017 revenues and 5/12 in their 2018 revenues. For federal income tax purposes, they need to include only 1/12 of the advance payment in their 2016 gross income. But they must include the remaining 11/12 in their 2017 gross income.

The applicable financial statement

An applicable financial statement is one that’s audited by an independent CPA or filed with the SEC or certain other government agencies. If you don’t have this statement, it’s still possible to defer income; you simply need a reasonable method for determining the extent to which advance payments are earned in Year 1.

Suppose, for example, that a company issues gift certificates but doesn’t track their use and doesn’t have an applicable financial statement. The company may be able to defer income based on a statistical study that indicates the percentage of gift certificates expected to be redeemed in Year 1.

If your business receives advance payments, consult your tax advisor to determine whether you can reduce your 2016 tax bill by deferring some of this income to 2017. And make sure you abide by the IRS’s rules on these payments. Contact David Porter, CPA for additional information on filing your 2016 taxes.

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