Patricia, i agree with Abby. You should treat the credit card purchases in the same fashion as Accounts Payable. If you don't include these charges, what would be your offset to the increase of debt?
If the taxpayer used their line of credit to purchase these items, the result would be the same.
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Stephen Mankowski BS
EP CAINE & ASSOCIATES, CPA LLC
Bryn Mawr PA
215-674-5652
Original Message:
Sent: 04-25-2016 12:31
From: Patricia Giunta
Subject: Business expenses on credit card
We have a new client that hasn’t filed prior S corp. returns. We are in the process of preparing several years of cash basis returns. The client has made purchases by credit card that we normally would deduct in the year the items were purchased. Since it is several years after the fact, we now know that the card card bills were never paid. Should we expense the items in the year purchased, and record the cancellation of debt income when the 1099-C is received, or decline to expense the items originally?
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Patricia Giunta
J.T. SHULMAN & COMPANY, PC CPAs
Carle Place NY
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