Federal Tax

  • 1.  Business expenses on credit card

    Bronze Most Valuable Member
    Posted 04-25-2016 12:31 PM

    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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  • 2.  RE: Business expenses on credit card

    Platinum Most Valuable Member
    Posted 04-25-2016 01:51 PM

    I have no authority that I am alluding to, but rather a comment.

     

    If it were not through a CC  but rather through an accounts payable, would your answer be any different ?

    So then I would proceed exactly as you have suggested.

     

    It would seem, that the client is entitled to the deduction, and that the income from cancellation of debt is exempt.

     

    And you are doing nothing wrong by proceeding this way.

     

     

     

    Abby Alhante,  CPA

     

    Kurcias  & Alhante, LLC  CPAs

    525 Broadhollow Road   Suite 104

    Melville NY  11747

    516.829-5890  Fax 516-829-3976

    Mobile 516-381-9301

    AbbyA@calldcap.com

    ( E mail response preferred )

    (Please consider the environment before  printing this email) 

     






  • 3.  RE: Business expenses on credit card

    Platinum Most Valuable Member
    Posted 04-26-2016 05:37 AM

    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



  • 4.  RE: Business expenses on credit card

    Gold Most Valuable Member
    Posted 04-26-2016 06:35 AM

    Why would you do thing differently?  Just because it was paid on a credit card that was never paid?  If it is supposed to be capitalized, capitalize and take depreciation.  Record the cc debt as it was incurred, adding the interest on the account  the balance on the card increased.  When they get the1099-C for debt forgiveness, then it becomes income.

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    Neil Fishman CPA
    FISHMAN ASSOCIATES CPAs PA
    Boynton Beach FL



Discussion Disclaimer

The opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute an accounting opinion.