The Internal Revenue Service has issued a revenue procedure that clarifies the rules for when a company uses the deferral method of accounting for advance payments that are received by the taxpayer for the sale of gift cards that are redeemable by an unrelated entity.
Any payment received by the taxpayer that is not recognized in income in the year of receipt must be recognized in the subsequent year.
Rev. Proc. 2013-29 modifies and clarifies Rev. Proc. 2011-18, 2011-5 I.R.B. 443. The Treasury Department and the IRS have concluded that a taxpayer should not be precluded from using the deferral method of accounting provided in section 5.02 of Rev. Proc. 2004-34 solely because the taxpayer never recognizes in revenues in its applicable financial statement payments from an eligible gift card sale, or, for taxpayers without an applicable financial statement, never earns payments from an eligible gift card sale.
The revenue procedure will be published in Internal Revenue Bulletin 2013-33 on Aug. 12, 2013.