KWERY:
My wife has a retail clothing store and I don’t think she is reporting all of the income. How might I get a sense for whether my suspicions are valid?
RESPONSE:
While there are several different ways to attempt to test whether or not there is unreported income, one quick visual is to compare the reported gross profit margin of the business as per its tax returns to that of the industry in general. By way of example, if the benchmarking information for the industry indicates that the typical gross profit margin is 45%, and if your wife is reporting say a 35% gross profit margin, that’s an indication there may be unreported income. There are potentially a number of good and valid answers as to why the gross profit margin is that low, but one possible answer is unreported income.
No comments:
Post a Comment