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  1. #1
    Join Date
    Apr 2018
    Posts
    3

    Default In Which Tax Year Can You Claim Year End Deductible Business Expenses

    I paid for some expenses, which are tax deductible, at the end of the year. I paid for them online and set it up as an ACH electronic draft so the money would be paid out of my bank account. The expenses did not finalize until the new year began. Can I deduct it in the year that I paid it or do I have to wait until the next years taxes since the transaction date is in the following year? Furthermore, if the answer is inconsistent with my past practice for previous tax years do I need to go and amend prior tax returns? Thank you in advance for your answer.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,263

    Default Re: Which Tax Year to Claim Year End Deductible Business Expenses

    You "paid" it on the date that you instructed the draft to be made. The fact that it "cleared" later doesn't matter.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,433

    Default Re: Which Tax Year to Claim Year End Deductible Business Expenses

    Quote Quoting SkinnyB15
    View Post
    I paid for some expenses, which are tax deductible, at the end of the year. I paid for them online and set it up as an ACH electronic draft so the money would be paid out of my bank account. The expenses did not finalize until the new year began. Can I deduct it in the year that I paid it or do I have to wait until the next years taxes since the transaction date is in the following year? Furthermore, if the answer is inconsistent with my past practice for previous tax years do I need to go and amend prior tax returns? Thank you in advance for your answer.
    flyingron’s answer assumes some things that I’ll not assume. The details matter. First, what kind of business entity is this: a corporation, LLC, LLP, sole propretorship, or something else? If it is a LLC, how many owners does it have and did it elect to be treated as a corporation rather than a sole proprietorship/partnership for tax purposes?

    What method of accounting does the business use — cash method, some form of accrual accounting, or what? The method of accounting is particularly important. And when you say that you have an established practice in the past, what has that practice been? A change in how you account for it might require you to seek approval from the IRS for a change in accounting methods (something that not many realize, including some tax pros that do mostly individual tax prep work).

    What kind of business do you do and exactly what were these expenses? And finally, you set up the payments to be made electronically. What was the date that you set up for the bank to actually pay them (as opposed to the date you sat at the computer and put in the payment dates), was it in the last tax year or this one? And what do you mean that the “expenses did not finalize” until later?

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