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Thread: Reporting cash sales

  1. #1
    Join Date
    Mar 2009
    Location
    New York
    Posts
    6

    Reporting cash sales

    My question for everyone is what is the typical amount that is reported on income statements? I'm sure that everyone on the forum fully state their income, but I'm sure there are others out there who underreport their cash sales

    I ask because I have worked with an accountant who seems to think that most bars/restaurants do not report cash sales but only their credit card sales. I am reporting total sales but my profits after taxes are marginal.

    Anyone have any stories about being audited by the IRS and consequences? What are the odds of being audited?

  2. #2
    Join Date
    Jan 2009
    Location
    San Antonio
    Posts
    35
    I have worked with an accountant who seems to think that most bars/restaurants do not report cash sales but only their credit card sales.
    Wish it worked that way. I could understand maybe not reporting some cover charge income, but if you are talking about income from product you'd have to be crazy. In Texas I've been audited by the IRS once and the State Comptroller three times. I've never had to pay any additional tax because they found everything in order. The Comptoller has auditted me twice over the last eight years, each time covering a four year span. They compare purchases to sales and if anything comes up short they make you pay the tax on everything missing as if it was sold at full price. Say you were missing product that would have sold for $50,000 you owe the tax on it whether is was sold, overpoured, skimmed, etc. $50,000 x 14%. I don't have a cover charge so everything is reported. If you can't make it legally in this business you need to figure out what your overlooking or doing wrong IMO....

  3. #3
    Join Date
    Sep 2004
    Location
    Arizona, USA
    Posts
    381
    I am reporting total sales but my profits after taxes are marginal.
    Do you think that by reporting CC sales only and not cash sales would increase your profits? If so, by how much? (I already know the answer, it wouldn't) If you are awashed in profitability, I can see the temptation to not report your cash sales, but most bars are not. And if you are... good luck getting the loan to purchase the building, extend the premises or do any other major improvements when you haven't reported your income.

    It all comes down to your income statement at the end of the year and how much taxes you had to pay. Please report all your income. You'll find that short term solutions never result in long term gain.

  4. #4
    Join Date
    Dec 2005
    Location
    PA
    Posts
    220
    Indeed,

    You need to report more than just your CC sales. My accountant says if you put it in the bank, you have to pay taxes on it. If you are going to go this route just make sure you keep your cash reserves off-premises just in case you get a visit from an auditor You can figure your taxes out that way, but if you want to sell the business, any buyer is going to want to see your tax returns. You can't show someone your POS receipts because you could completely make those up. We actually ran into this problem once. Business wasn't showing profit, so the buyer backed out.

    You may or may not have problems getting loans depending on your clout with local banks. The owner of my bar has been in business in the area for over 30 years, has a history of successful businesses and he knows the loan officers. He gets loans without even having to write proposals. Most banks also understand that the bar/restaurant business is a largely cash business. They usually have a number that they multiply your tax return by to estimate what you actually make.

    One other thing you may want to keep in mind...if you are NOT a sole proprietorship, you are better off putting EVERYTHING in the bank. If you are doing the bookwork for more than yourself, the partner(s) is/are going to need to know how to split the profits. If the books are too confusing to figure out, they may accuse you of cooking the books. You don't want to have that.

  5. #5
    Join Date
    Mar 2009
    Location
    New York
    Posts
    6
    Thanks for all your input. I agree completely that reported income should be done legitimately and its not really an issue right now since the bar is still quite young and not yet profitable. However, from previous experience, I did work previously at a restaurant/bar in san francisco that did not report cash sales plus my accountant does work for many bars in my city so it apparently is something that is done in my city.

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