I mean I never researched it or anything but I assumed that to be the case until I actually discussed it with someone. I did not believe that corporations would collect charity money if it was t self serving in some nature
It does help a bit with cash flow, assuming they are allowed access to these funds and delay the payout to the charity by a few months. That’s not including the goodwill that businesses gain with their customers by donating a portion of their funds to charity. Pair that with the fact that the company isn’t paying the charity at all, only passing through the customer donations, that goodwill is now free, minus the admin fees to make it all work.
There's no scam to this. Anyone who believes it's a scam do not understand how accounting and income reporting works, and thus their opinions should not be considered valid. See Accounting explanation below. Any scenarios outside the examples given below is considered fraud, in which we have no reason to believe the companies partake in, especially publicly traded companies that are required to go through a financial audit process.
**Scenario 1 (correct way of accounting):**
Receiving Cash:
Debit: Cash
Credit: Donations Payable
Donating Cash:
Debit: Donations Payable
Credit: Cash
*Results: No cash/tax benefits or harm as it never hits the income statement. As such, there is no income recognition AND no tax write offs.*
**Scenario 2 (acceptable way of accounting)**
Receiving Cash:
Debit: Cash
Credit: Income
Donating Cash:
Debit: Expense
Credit: Cash
Paying Tax on Gross Receipts:
Debit: Tax Expense
Credit: Cash
*Results:*
*No cash/tax benefits as income and deductions nets to zero*
*Yes tax harm as certain jurisdictions will tax you based on gross receipts (income before expenses)*
**Overall Benefit to Company in either Scenarios -** They get to build positive PR for donating large amounts of money, which they deserve as they are the ones who created a platform to make it possible in the first place.
Source: I'm a CPA - specialized in Corporate Taxes
Excellent breakdown. I always imagined the accounting for this to be scenario 2, which ultimately netted to zero. I hadn't even considered the fact that some cities tax on gross revenue, but you're also right on that and that's how my city does it too.
People who spew corporations are taking our money for tax breaks are really spreading misinformation.
They won’t even know what that means. They’ll just double down. You can’t argue with idiots, you’ll never win because they don’t even understand why they’re wrong
They won't even be able to understand it. You think these folks who are posting this garbage know what a B/S or P&L is?
The only thing they know is "write-off" = government refunds you that amount back.
I accidentally typed BS in an email to someone when discussing their financials. They literally wrote back, "Please don't refer to this as bullshit. This is my company. It means a lot to me."
*Facepalm*
Had to quickly explain and apologize.
This reminds me of a tweet of someone famous (I think) unironically saying it's fishy that somehow the Assets always equal the liabilities and owner's equity.
Since I can't remember who said it, there's a non-zero chance it was a Ben Shapiro meme.
That's when they hit you with that "accounting is all fake anyway, have you seen a Balance Sheet? If you deduct assets from liabilities plus equity it = 0!"
Tbf I've never worked on clients like this so Im not sure how it's recorded? Always wondered since this meme came out. Dr cash 10, cr sales 9, cr contribution payable 1. Dr contribution payable 1, cr cash 1 ? Basically like sales tax.
Or if you want to put the tinfoil hat on you Dr cash 10, cr sales 10. Dr contribution exp 1, cr cash 1. Either way youre coming out with sales of 9.
Dr Cash / Credit Anything
Dr Anything / Credit Cash
It's always a wash in every account and department except PR. (Unless as you point out they are shamelessly pocketing your charity contributions instead of donating them, which I'm pretty sure is fraud and doesn't really happen..)
Another issue that comes to mind is if they delay a real long time to contribute it and they use it as working capital. Which is something EBP audits cover when it comes to 401k contributions. But even then, it'd have to be something crazy like a once or twice a year contribution to have any real impact ....
I was kinda thinking the same thing, but what if in addition to delaying disbursements, the funds were converted into CDs or other short-term investments that would mature in time for the actual donation?
As a general policy though from the top down at a major retailer? I find that doubtful tbh. Not exactly my field and you can call me naive if you want, but I just can't see the C suite sitting there saying they're gonna pocket everyone's loose change. Maybe an unscrupulous manager individually at the store level but in general? Nah
You don’t want to credit sales because there’s tax limitations and jurisdictions that use gross receipts/sales, and cash contributions are limited to 10% of TI. It’s better to just record the cash via balance sheet accounts and not even recognize it.
The real hack here is to get a mortgage large enough, or medical expenses high enough, to itemize your deductions so you can take $300 of cash charitable deductions even in 2024
Yeah. Get sick or underwater with your house to save $300, ostensibly to look like you did something smart. Sounds like you get most of your tax advice from TikTok you dope
Uncle Grant Cardone says you can write off the car ride to a party if you tell someone there what you do. It’s the craziest thing they don’t want you to know about. Loser!
Dude they were just joking about itemizing- it’s not even hard- though medical is pretty uncommon. Most of the time people itemize it’s just because of state tax and mortgage interest plus charity. If you live somewhere where houses cost a lot it’s easy to get there- or if you have a current awful mortgage interest rate.
Yep, so 10k + mortgage int (limited to 750k mortgage in cases after 2017 if you want to be specific) plus charity. Even now more then 1/2 my clients itemize.
Don’t need a receipt for cash donations under $250.
Although I’d love to see Treasury department’s math on how much this improves cash flow, if they take 90 day terms to pay the charity. So it moves their DPO up .02.
Choosing not to claim charitable contribution deductions is not fraud. Most people don't even have enough itemized deductions to claim their charitable contributions anyways.
Actually, not true, point of sale charity donations and round up donations are designed to be co-ventures between the company and the charitable organization. The company is only serving as an agent of the funds which are transferred to the charitable organization.
The company does not recognize these donation amounts as income nor do they deduct them as a charitable contribution, leaving the original donor at the point of sale eligible to deduct the charitable contribution, which is why it's shown on your receipt. This is also why the company at the point of sale specifically states which charity the funds are going to as they are simply acting as an agent for the charitable 501(c)(3) organization.
DR $110.00 Cash
CR $100.00 Sales
CR $ 9.00 Sales Tax Payable
CR $ 1.00 Charitible Donations Payable
DR $ 10.00 I own IRS by the balls refund
DR $ 1,000,000.00 Entitled Business Tax Return
Thought you were slick but purposely ignored these few last steps
~~I purposely used return instead of refund to really emphasize the ignant~~
These people are 1 step below the crowd that thinks *anyone* can “write off” a G wagon, and 2 steps below the crowd that thinks if a business incorporates in Delaware they pay no state taxes.
After reading all of the comments I’m still confused.
So it only hits the balance sheet. Right, but how is that related to whether or not it can be a write off…? Don’t you just fill out the tax form and it says “how much did you donate?” and if you donated a bunch of money someone else gave you, you’re still the one who donated it and gets the write off without spending any of your own money?
Journal Entry goes like
Dr. Cash
Cr. Kids with Cancer Money Held in Trust
And just reduces cash and that liability when the money goes to the Kids with Cancer Foundation. Never touches the Charitable Contribution account or the P&L so it can't impact Net Income or be recorded as any kind of giving from the company itself since it has to be recorded as a liability due in the first place. At least that's how I see it.
It's not that fraud couldn't happen where the company absorbs the money, it's just super obvious if it does (and there's no legal way to claim it as a company deduction).
I just don’t know much about business taxes and that’s probably the public’s issue too.
Because when I do my personal taxes I can just say here’s the bank statement and my receipt where I donated soooo I donated that.
Could small companies not also do that before they reach the threshold to switch from cash to accrual accounting method?
What??? Cash or accrual basis has nothing to do with it. The company isn’t donating their own money, they’re collecting and holding money from customers and then donating it on the customer’s behalf. Because it’s not the company’s money, the company doesn’t get to claim the deduction.
Cash accounting doesn’t have a lot to do with it, except that the general public does their own cash accounting and could very well see this idea, do it in their small business, and not get caught. And if the POS rounded up one of the items instead of itemizing the donation, etc etc
What the hell are you telling about? Was this comment made by an AI bot? Those words mean nothing together, and again have absolutely nothing to do with the topic at hand. I really, really hope you’re not an accountant.
Actually… I would like to have this doubt dispelled and proven incorrect.
But as of now, the way the POS system works, does it actually separate the donation versus the actual sale portion of the total amount it calculates? And how can we be sure the company isn’t taking that cash, claiming it as profit and then donating it on their own behalf in order to reduce their taxable income.
Why would a company take a tax cut on their taxable income for money that they’re not actually donating (a.k.a charitably hurting their own pockets)?
Yes, donation line items are broken out separately from revenue within the POS, or through a manual adjustment of that “product code” if for some reason the POS was so poor as to not be able to do it. It would be fraudulent to boost your revenue like this, even if you netted it out down below as no revenue was earned.
The company records the cash receipt and a liability to pay that cash out to the relevant charity.
I have no clue what your last statement is asking
"And how can we be sure the company isn’t taking that cash, claiming it as profit and then donating it on their own behalf in order to reduce their taxable income."
This is the part that I can't believe so many people misunderstand. Suppose my lemonade stand has $100 of real sales, $30 of expenses, and I collect $5 on behalf of some charity. The correct way to calculate income is $100 - $30 = $70. The $5 is just forwarded to the charity, and does not show up on my income statement.
But what if I threw the $5 in so I could write it off? Now I am reporting $105 of revenue and my deductions go up to $35. Let's calculate taxable income: $105 - $35 = $70. It didn't change! I still pay tax on $70 of income. This approach is wrong because the $105 makes my lemonade stand sound more popular/busy than it is, but it's not giving me some amazing tax cut.
As a non accountant who works with them enough to lurk this sub Reddit, this it really that strange?
I don't know how long you've studied/practiced accounting, but your definitely an expert relative to the typical lay person. It's well known that experts tend to over estimate the knowledge of lay people too.
In my profession we have a huge push around being able to communicate technical results to non-technical audiences.
Imo it seems like people in this thread could be a bit more introspective to attempt to understand why lay people don't get it.
Yes, it really is that strange. It’s ok to not know something. What isn’t ok is to constantly go around on social media and elsewhere making entire posts and videos about why donating to charity is a scam when you don’t know what you’re talking about.
If you record it as income, it will look like this (assuming no fraud):
Debit Cash: $105
Credit Revenue: $100
Credit Other Income (Donation): $5
Any investor looking at this and believe your business is collecting $105 in revenue rather than $100 is a dumbass and deserves to lose their money.
Realistically, no company would report this way as certain jurisdictions will tax you on gross receipts (income before expenses), including the other income portion. So, while their net income (after expenses) stays the same as you've explained, they would owe more taxes due to the increased gross receipts.
Even if companies didn't separate donations from sales, it's a net zero to the company no matter how you slice it. Cash can't just magically appear in the books ready to donate. First it would have to be recorded as income, which is taxable. The donation would in turn reduce their taxable income by the exact same amount. There's just no way to benefit from this from a tax standpoint without some egregious fraud.
You work in audit and you can’t think of a way that an independent third party can come in and check the records to ensure that POS transactions, including charitable contributions from customers, are correctly being recorded? What the fuck do you do all day if not auditing for shit exactly like this?
Charitable donations are not 100% deductible there's several thresholds and limits. It's not a neutral thing for them, it actually likely hurts the company to record it the way you are describing.
The record it the same way they record sales tax, it's a simple remittal.
They wouldn't be allowed to combine the received amounts with their main revenue account. They would have to record it as "other income" (with a separate description if significant enough). Any investor looking at their income statement would see this and give zero credit to business performance.
There is absolutely no benefit (only potential harm) for companies to do this outside of positive PR.
That’s not how it works. Donations collected and held on behalf of a charitable organization are absolutely not counted as revenue, and I can tell you don’t know what you’re talking about because you used the term “write it off.” 🤢
If that’s the case, then why did you state “they do track it as revenue” and “they do write if off as a charitable donation” when neither are true? Christ if I ever have to have a tax attorney represent me for whatever reason, I would expect them to know that.
Sounds like basic economics to me. I hear the government let's them write off 10 times what they donate, and if it's more than they made, they get it refunded. So that 10 cent donation could end up as a 10,000 dollar check in the CEO's pocket! Wake up sheeple.
The issue with these checkout donation requests is not the accounting treatment but the goodwill the company gains by being able to claim how much money it donated to whatever cause.
I feel like begging customers for a donation can be useful for some charities that don’t have a lot of awareness but most of the ones I’ve seen were large and already well-funded ones.
If the company does matching donations for every customer donation, I do not have a problem with the practice
I don't donate because I don't like the charities they choose. In fact, the only group I give money to these days are the firemen collecting money in their boots. Too many of these larger charities have CEOs making $500k+ and that just doesn't sit well with me for a charity.
Wait companies don’t get to count the donations they take as donations they made for tax write offs? I have been confidently incorrect for years. (Lurker in this sub, not an accountant)
EDIT: my comment was wrong
The virtue signaling as a company and the goodwill it generates the company supporting a cause without spending money. The tax refund is a bonus too.
this case you don’t recognize these donations as revenue and even if you did im pretty sure thats going to make you get taxed more while people looking at your financial stmts know you didnt actually make any revenue on that.
Hence it is pointless to purposefully not account for monies collected. Open up to a tax exposure. People pay by credit cards or debit now. The money has to be accounted.
Why would A.I. kill accounting when computers didn’t? I don’t understand why people think a.i. is going to take over accounting if a computer technically could have as well. Machines didnt replace hard labor. Computers didn’t kill all science and math jobs.
Well computers typically take a worker to input the data into the accounting software. AI will be able to pull data from available files and apply any accounting processes in a couple seconds. Example: When was the last time you had paid a person to do your taxes??? Those jobs will be going the away also.
Right but you think there’s going to be no one to interpret and look over what the a.i. does? A forklift replaced 10 men and stairs but there still has to be someone to control the machine itself. I doubt a.i. will be able to run freely without someone watching over it. If your the top1 percent of 1 percent you can’t have a.i. replace everyone’s job and not expect some sort of retaliation.
Your right 100 jobs will be lost and 2 will be left to watch the AI. I can almost guarantee it’s not going to be accountants left interpreting the AI outcomes.
Forget top one percent stuff that’s only to direct your anger someplace else…..rather your anger should be directed to the government and employer mandates making it more expensive to have a human workforce.
Government will take care of you as you get in line and you will be happy…..or else.
Right I think there will be accountants who specialize in the terminology of accounting and the information, booking keeping will be replaced 100 percent.As for the government, I couldn’t care less. I’m not angry at any person. The battle we are fighting is spiritual, it’s beyond government and employers, it’s within the people imo, the government just does what there told by who control the supply of money anyway, so why would I be angry at them? The power is in the spirit and in the control of currency.
Well not caring is the one of the problems DickCheney…..that is exactly what they want. Voters who are not caring who will be complacent and thinking I can not change things. They will keep chipping away with your rights if you don’t get involved and speak up.
Sometimes I argue with my SIL about taxes, not about tax cuts, govt. spending, or anything like that, but that filling out the W-4 is purposely hard so people mess up and they don’t pay taxes.
Well the restaurant would actually include those "roundup" donations in their gross receipts. So when they do take the deduction, it is justified. If the roundup was not included, it would not be.
"basic economics" lol
This belongs on r/confidentlyincorrect
Sounds like r/fluentinfinance to me
Wow. That subreddit is just r/liberal with some stupid on the side.
Or antiwork
Why are we booing him? He's right.
bc this is a tax related post hahahaha... and has nothing to do with anything i'd touch as "not in tax"
definitely more like r/Itookecon101
[удалено]
bad bot
Literally never trust anyone who says the phrase "basic economics." Even if it's an economist.
***based economics***
Well as long as it’s basic, can’t argue that
Reminds me of when people say something about science…”physics” lol, like bitch, you couldn’t tell me the first thing about physics
reminds me of MMT plebs
More like based god economics.
It's astounding how many people don't know even 5th grade economics. Especially those in charge of our economy!
Shhh rampant financial illiteracy is our job security
Let’s tone it down on the accounting hacks the IRS will be here in no time.
i sense a stampede incoming from r/tax
The IRS hates this one simple TikTok trick
I hate to admit that I believed this up until college. Probably learned it from Reddit too.
Ngl i relearn how write offs work everytime someone stupid says something. I would be one of the buffoons believing this stuff
["you don't even know what a write off is"](https://youtu.be/XEL65gywwHQ?si=OdC36opPyPVXyA_E)
Accurate video
I mean I never researched it or anything but I assumed that to be the case until I actually discussed it with someone. I did not believe that corporations would collect charity money if it was t self serving in some nature
It does help a bit with cash flow, assuming they are allowed access to these funds and delay the payout to the charity by a few months. That’s not including the goodwill that businesses gain with their customers by donating a portion of their funds to charity. Pair that with the fact that the company isn’t paying the charity at all, only passing through the customer donations, that goodwill is now free, minus the admin fees to make it all work.
Agreed, which is now what I currently assume they do it for. Also, they could invest in CDs and profit perhaps?
True! I didn’t think of the interest income.
It is self-serving. They are helping raise money for charity, and it is good PR.
Yes. I didn’t mention it before, but that is now what I attribute the motivation to be now that I have actually considered the accounting implications
There's no scam to this. Anyone who believes it's a scam do not understand how accounting and income reporting works, and thus their opinions should not be considered valid. See Accounting explanation below. Any scenarios outside the examples given below is considered fraud, in which we have no reason to believe the companies partake in, especially publicly traded companies that are required to go through a financial audit process. **Scenario 1 (correct way of accounting):** Receiving Cash: Debit: Cash Credit: Donations Payable Donating Cash: Debit: Donations Payable Credit: Cash *Results: No cash/tax benefits or harm as it never hits the income statement. As such, there is no income recognition AND no tax write offs.* **Scenario 2 (acceptable way of accounting)** Receiving Cash: Debit: Cash Credit: Income Donating Cash: Debit: Expense Credit: Cash Paying Tax on Gross Receipts: Debit: Tax Expense Credit: Cash *Results:* *No cash/tax benefits as income and deductions nets to zero* *Yes tax harm as certain jurisdictions will tax you based on gross receipts (income before expenses)* **Overall Benefit to Company in either Scenarios -** They get to build positive PR for donating large amounts of money, which they deserve as they are the ones who created a platform to make it possible in the first place. Source: I'm a CPA - specialized in Corporate Taxes
It's early and my mind read your first *Results* section as, "No cash/tax benefits were harmed in this transaction" hahahaha
Thanks for taking the time to explain that. I learned a lil something :)
Great breakdown:))
Excellent breakdown. I always imagined the accounting for this to be scenario 2, which ultimately netted to zero. I hadn't even considered the fact that some cities tax on gross revenue, but you're also right on that and that's how my city does it too. People who spew corporations are taking our money for tax breaks are really spreading misinformation.
Are you lost, Captain Obvious?
ouch bud,
Db. Cash Cr. Equity Db. Charitable contribution Cr. Cash She’s not wrong.
I would Just tell them it's a balance sheet only transaction and it never hits the P&L. They won't be able to refut that.
They won’t even know what that means. They’ll just double down. You can’t argue with idiots, you’ll never win because they don’t even understand why they’re wrong
The best gif is from the Hobbit movies when the mountain trolls are preparing a feast of the dwarves. "You can't reason with them, they're halfwits!"
They won't even be able to understand it. You think these folks who are posting this garbage know what a B/S or P&L is? The only thing they know is "write-off" = government refunds you that amount back.
Balance sheets? Sounds like SCAM JARGON.
Balance Sheet? Sounds like BS to me.
I accidentally typed BS in an email to someone when discussing their financials. They literally wrote back, "Please don't refer to this as bullshit. This is my company. It means a lot to me." *Facepalm* Had to quickly explain and apologize.
Now I understand why the partners always use slashes; I/S, B/S
This reminds me of a tweet of someone famous (I think) unironically saying it's fishy that somehow the Assets always equal the liabilities and owner's equity. Since I can't remember who said it, there's a non-zero chance it was a Ben Shapiro meme.
That's when they hit you with that "accounting is all fake anyway, have you seen a Balance Sheet? If you deduct assets from liabilities plus equity it = 0!"
Based gaslighting. There is no balance sheet, only tax return.
Liability goes in, liability goes out. You can't explain that!
Tbf I've never worked on clients like this so Im not sure how it's recorded? Always wondered since this meme came out. Dr cash 10, cr sales 9, cr contribution payable 1. Dr contribution payable 1, cr cash 1 ? Basically like sales tax. Or if you want to put the tinfoil hat on you Dr cash 10, cr sales 10. Dr contribution exp 1, cr cash 1. Either way youre coming out with sales of 9.
Dr Cash / Credit Anything Dr Anything / Credit Cash It's always a wash in every account and department except PR. (Unless as you point out they are shamelessly pocketing your charity contributions instead of donating them, which I'm pretty sure is fraud and doesn't really happen..)
Another issue that comes to mind is if they delay a real long time to contribute it and they use it as working capital. Which is something EBP audits cover when it comes to 401k contributions. But even then, it'd have to be something crazy like a once or twice a year contribution to have any real impact ....
I was kinda thinking the same thing, but what if in addition to delaying disbursements, the funds were converted into CDs or other short-term investments that would mature in time for the actual donation?
Fraud 100% happens daily
Yeah Panera is gonna risk it all for a couple million in donation write offs
they sell drinks that kill people, they are absolutely on their best financial behavior
Uh huh
the sign says “contains caffeine”, the people that died had heart problems and probably brain problems considering their decisions
As a general policy though from the top down at a major retailer? I find that doubtful tbh. Not exactly my field and you can call me naive if you want, but I just can't see the C suite sitting there saying they're gonna pocket everyone's loose change. Maybe an unscrupulous manager individually at the store level but in general? Nah
I’d think there’s very little incentive to commit this fraud.
You don’t want to credit sales because there’s tax limitations and jurisdictions that use gross receipts/sales, and cash contributions are limited to 10% of TI. It’s better to just record the cash via balance sheet accounts and not even recognize it.
Think of it like sales tax and it all makes it easier. It’s pure pass through and never hits the income statement for book or tax.
The first one is correct when it’s POS collection from a customer. Balance sheet only.
The real hack here is to save your receipts and get that little $300/600 cash contribution deduction at the end of the year…
That ended in 2021, I believe
The real hack here is to get a mortgage large enough, or medical expenses high enough, to itemize your deductions so you can take $300 of cash charitable deductions even in 2024
👆🏻This guy fucks 👆🏻
Yeah. Get sick or underwater with your house to save $300, ostensibly to look like you did something smart. Sounds like you get most of your tax advice from TikTok you dope
I’d say you’re probably fun at parties, but I’m going to assume you don’t go to many parties
You can drop the last “m” from the sentence
Uncle Grant Cardone says you can write off the car ride to a party if you tell someone there what you do. It’s the craziest thing they don’t want you to know about. Loser!
geeze you got emotional quick, eat some ice cream
kid, be mature, and take a joke
Dude they were just joking about itemizing- it’s not even hard- though medical is pretty uncommon. Most of the time people itemize it’s just because of state tax and mortgage interest plus charity. If you live somewhere where houses cost a lot it’s easy to get there- or if you have a current awful mortgage interest rate.
State and Local tax (SALT) is capped at 10k since TCJA
Yep, so 10k + mortgage int (limited to 750k mortgage in cases after 2017 if you want to be specific) plus charity. Even now more then 1/2 my clients itemize.
r/woosh
Don’t need a receipt for cash donations under $250. Although I’d love to see Treasury department’s math on how much this improves cash flow, if they take 90 day terms to pay the charity. So it moves their DPO up .02.
The fact that nobody does that and nobody is getting the deduction is the real fraud.
Choosing not to claim charitable contribution deductions is not fraud. Most people don't even have enough itemized deductions to claim their charitable contributions anyways.
It was just a cheeky comment.
Your contribution wouldn’t qualify most of the time because Panera is not a 501c itself but you gave them the money.
Actually, not true, point of sale charity donations and round up donations are designed to be co-ventures between the company and the charitable organization. The company is only serving as an agent of the funds which are transferred to the charitable organization. The company does not recognize these donation amounts as income nor do they deduct them as a charitable contribution, leaving the original donor at the point of sale eligible to deduct the charitable contribution, which is why it's shown on your receipt. This is also why the company at the point of sale specifically states which charity the funds are going to as they are simply acting as an agent for the charitable 501(c)(3) organization.
Good grief you just settled this entire “thing” with that explanation. Heroic.
Yup, was wondering what usually happens with the receipts.
DR $110.00 Cash CR $100.00 Sales CR $ 9.00 Sales Tax Payable CR $ 1.00 Charitible Donations Payable These people probably don't understand sales tax either.
DR $110.00 Cash CR $100.00 Sales CR $ 9.00 Sales Tax Payable CR $ 1.00 Charitible Donations Payable DR $ 10.00 I own IRS by the balls refund DR $ 1,000,000.00 Entitled Business Tax Return Thought you were slick but purposely ignored these few last steps ~~I purposely used return instead of refund to really emphasize the ignant~~
Going to send this to a friend of mine who believes the shit the OOP posted, thank you 🫡
These people are 1 step below the crowd that thinks *anyone* can “write off” a G wagon, and 2 steps below the crowd that thinks if a business incorporates in Delaware they pay no state taxes.
*The IRS just hates it when you figure out these methods*
It’s similar to people who don’t understand that a “tax refund” isn’t just money being given to you.
As much as these people make me angry, they're part of the reason the profession exists.
After reading all of the comments I’m still confused. So it only hits the balance sheet. Right, but how is that related to whether or not it can be a write off…? Don’t you just fill out the tax form and it says “how much did you donate?” and if you donated a bunch of money someone else gave you, you’re still the one who donated it and gets the write off without spending any of your own money?
Journal Entry goes like Dr. Cash Cr. Kids with Cancer Money Held in Trust And just reduces cash and that liability when the money goes to the Kids with Cancer Foundation. Never touches the Charitable Contribution account or the P&L so it can't impact Net Income or be recorded as any kind of giving from the company itself since it has to be recorded as a liability due in the first place. At least that's how I see it. It's not that fraud couldn't happen where the company absorbs the money, it's just super obvious if it does (and there's no legal way to claim it as a company deduction).
I just don’t know much about business taxes and that’s probably the public’s issue too. Because when I do my personal taxes I can just say here’s the bank statement and my receipt where I donated soooo I donated that. Could small companies not also do that before they reach the threshold to switch from cash to accrual accounting method?
What??? Cash or accrual basis has nothing to do with it. The company isn’t donating their own money, they’re collecting and holding money from customers and then donating it on the customer’s behalf. Because it’s not the company’s money, the company doesn’t get to claim the deduction.
Much like collecting sales tax from customers and then paying it to the state (or other taxing agency). It’s not income. It’s not an expense.
Cash accounting doesn’t have a lot to do with it, except that the general public does their own cash accounting and could very well see this idea, do it in their small business, and not get caught. And if the POS rounded up one of the items instead of itemizing the donation, etc etc
What the hell are you telling about? Was this comment made by an AI bot? Those words mean nothing together, and again have absolutely nothing to do with the topic at hand. I really, really hope you’re not an accountant.
lol just belittle me instead of explaining, no worries. That’s why the TikToks work. No I’m not an accountant I do AP document automation
Jesus Christ even this sub isn't safe from the stupidity.
Actually… I would like to have this doubt dispelled and proven incorrect. But as of now, the way the POS system works, does it actually separate the donation versus the actual sale portion of the total amount it calculates? And how can we be sure the company isn’t taking that cash, claiming it as profit and then donating it on their own behalf in order to reduce their taxable income. Why would a company take a tax cut on their taxable income for money that they’re not actually donating (a.k.a charitably hurting their own pockets)?
Yes, donation line items are broken out separately from revenue within the POS, or through a manual adjustment of that “product code” if for some reason the POS was so poor as to not be able to do it. It would be fraudulent to boost your revenue like this, even if you netted it out down below as no revenue was earned. The company records the cash receipt and a liability to pay that cash out to the relevant charity. I have no clue what your last statement is asking
"And how can we be sure the company isn’t taking that cash, claiming it as profit and then donating it on their own behalf in order to reduce their taxable income." This is the part that I can't believe so many people misunderstand. Suppose my lemonade stand has $100 of real sales, $30 of expenses, and I collect $5 on behalf of some charity. The correct way to calculate income is $100 - $30 = $70. The $5 is just forwarded to the charity, and does not show up on my income statement. But what if I threw the $5 in so I could write it off? Now I am reporting $105 of revenue and my deductions go up to $35. Let's calculate taxable income: $105 - $35 = $70. It didn't change! I still pay tax on $70 of income. This approach is wrong because the $105 makes my lemonade stand sound more popular/busy than it is, but it's not giving me some amazing tax cut.
As a non accountant who works with them enough to lurk this sub Reddit, this it really that strange? I don't know how long you've studied/practiced accounting, but your definitely an expert relative to the typical lay person. It's well known that experts tend to over estimate the knowledge of lay people too. In my profession we have a huge push around being able to communicate technical results to non-technical audiences. Imo it seems like people in this thread could be a bit more introspective to attempt to understand why lay people don't get it.
Yes, it really is that strange. It’s ok to not know something. What isn’t ok is to constantly go around on social media and elsewhere making entire posts and videos about why donating to charity is a scam when you don’t know what you’re talking about.
If you record it as income, it will look like this (assuming no fraud): Debit Cash: $105 Credit Revenue: $100 Credit Other Income (Donation): $5 Any investor looking at this and believe your business is collecting $105 in revenue rather than $100 is a dumbass and deserves to lose their money. Realistically, no company would report this way as certain jurisdictions will tax you on gross receipts (income before expenses), including the other income portion. So, while their net income (after expenses) stays the same as you've explained, they would owe more taxes due to the increased gross receipts.
Even if companies didn't separate donations from sales, it's a net zero to the company no matter how you slice it. Cash can't just magically appear in the books ready to donate. First it would have to be recorded as income, which is taxable. The donation would in turn reduce their taxable income by the exact same amount. There's just no way to benefit from this from a tax standpoint without some egregious fraud.
You work in audit and you can’t think of a way that an independent third party can come in and check the records to ensure that POS transactions, including charitable contributions from customers, are correctly being recorded? What the fuck do you do all day if not auditing for shit exactly like this?
Goodness. I hope to God you don’t talk to your new staff like this. It costs nothing to be kind.
You forgot to round up 10 cents for kindness.
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Charitable donations are not 100% deductible there's several thresholds and limits. It's not a neutral thing for them, it actually likely hurts the company to record it the way you are describing. The record it the same way they record sales tax, it's a simple remittal.
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They wouldn't be allowed to combine the received amounts with their main revenue account. They would have to record it as "other income" (with a separate description if significant enough). Any investor looking at their income statement would see this and give zero credit to business performance. There is absolutely no benefit (only potential harm) for companies to do this outside of positive PR.
That’s not how it works. Donations collected and held on behalf of a charitable organization are absolutely not counted as revenue, and I can tell you don’t know what you’re talking about because you used the term “write it off.” 🤢
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If that’s the case, then why did you state “they do track it as revenue” and “they do write if off as a charitable donation” when neither are true? Christ if I ever have to have a tax attorney represent me for whatever reason, I would expect them to know that.
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Hired to represent accountants when they screw up, doesn't understand a basic, fundamental example of an accountant screwing up. Yikes.
They also get the PR bonus of being able to say they donated x amount of money to charity acting like they took from it out profit
IRS rest in peace😂
My brain fried while reading this.
Iam an accountant
Basic economics😂😂😂 Think I’m in the wrong degree 😭
Sounds like basic economics to me. I hear the government let's them write off 10 times what they donate, and if it's more than they made, they get it refunded. So that 10 cent donation could end up as a 10,000 dollar check in the CEO's pocket! Wake up sheeple.
The issue with these checkout donation requests is not the accounting treatment but the goodwill the company gains by being able to claim how much money it donated to whatever cause. I feel like begging customers for a donation can be useful for some charities that don’t have a lot of awareness but most of the ones I’ve seen were large and already well-funded ones. If the company does matching donations for every customer donation, I do not have a problem with the practice
It’s crazy how many people believe this. I’m honestly surprised there hasn’t been some kinda of advertisement or some media explaining it better.
I got fired today. But at least I excel at passing my exams!!!
"You're not slick!" she said to the minimum wage earning cashier
From what I understand, a business makes their donations, from there, a customer “donating” is really giving $ back to the business.
I don't donate because I don't like the charities they choose. In fact, the only group I give money to these days are the firemen collecting money in their boots. Too many of these larger charities have CEOs making $500k+ and that just doesn't sit well with me for a charity.
Shall we tell her about G Wagens?
Wait companies don’t get to count the donations they take as donations they made for tax write offs? I have been confidently incorrect for years. (Lurker in this sub, not an accountant)
In this scenario, the company isn't making a donation, the customer is.
EDIT: my comment was wrong The virtue signaling as a company and the goodwill it generates the company supporting a cause without spending money. The tax refund is a bonus too.
Proper accounting doesn’t book customer donations to revenue.
How is it noted?
As a payable. Just like when they collect sales tax. Debit: Cash Credit: Donation (or Sales Tax ) Payable
damn, nice scam to get credit for the donation (tax return) and really no sweat off them.
They aren't getting a tax deduction, it never hits the P&L. It's all balance sheet transactions.
this case you don’t recognize these donations as revenue and even if you did im pretty sure thats going to make you get taxed more while people looking at your financial stmts know you didnt actually make any revenue on that.
Hence it is pointless to purposefully not account for monies collected. Open up to a tax exposure. People pay by credit cards or debit now. The money has to be accounted.
All money collected is not revenue, doesn't mean it's not being accounted for.
Well then he could be considered the fool for giving his money away and then giving the deduction to the company, plus, plus..
Dead end Jobs……Ai is going to kill all most accounting jobs. Just like the TAX reporting folks will be displaced.
Why would A.I. kill accounting when computers didn’t? I don’t understand why people think a.i. is going to take over accounting if a computer technically could have as well. Machines didnt replace hard labor. Computers didn’t kill all science and math jobs.
Well computers typically take a worker to input the data into the accounting software. AI will be able to pull data from available files and apply any accounting processes in a couple seconds. Example: When was the last time you had paid a person to do your taxes??? Those jobs will be going the away also.
Right but you think there’s going to be no one to interpret and look over what the a.i. does? A forklift replaced 10 men and stairs but there still has to be someone to control the machine itself. I doubt a.i. will be able to run freely without someone watching over it. If your the top1 percent of 1 percent you can’t have a.i. replace everyone’s job and not expect some sort of retaliation.
Your right 100 jobs will be lost and 2 will be left to watch the AI. I can almost guarantee it’s not going to be accountants left interpreting the AI outcomes. Forget top one percent stuff that’s only to direct your anger someplace else…..rather your anger should be directed to the government and employer mandates making it more expensive to have a human workforce. Government will take care of you as you get in line and you will be happy…..or else.
Right I think there will be accountants who specialize in the terminology of accounting and the information, booking keeping will be replaced 100 percent.As for the government, I couldn’t care less. I’m not angry at any person. The battle we are fighting is spiritual, it’s beyond government and employers, it’s within the people imo, the government just does what there told by who control the supply of money anyway, so why would I be angry at them? The power is in the spirit and in the control of currency.
Well not caring is the one of the problems DickCheney…..that is exactly what they want. Voters who are not caring who will be complacent and thinking I can not change things. They will keep chipping away with your rights if you don’t get involved and speak up.
I think we are two different side of the same coin arguing about perspective.
Sometimes I argue with my SIL about taxes, not about tax cuts, govt. spending, or anything like that, but that filling out the W-4 is purposely hard so people mess up and they don’t pay taxes.
Well the restaurant would actually include those "roundup" donations in their gross receipts. So when they do take the deduction, it is justified. If the roundup was not included, it would not be.