business expenses on credit card

Barry1156 · #1 (**permalink**) 02-09-2014, 02:44 PM

I am a sole proprietor organized as a LLC. I have a business credit card that I use strictly for business purposes. My question is how to treat expenses for which I have not paid the credit card company. Unfortunately, I am running a balance on the card every month, and with things being the way they are, I can't make much more than the minimum payment on the card (I'm not in default, though). Suppose that I make $100 of business purchases in a given month and pay that bill on time. Each transaction is invoiced against a vendor (postage to the USPS, a monthly software license fee to that vendor, and so on). However, I can only pay the minimum payment, let's say $75.00. in my bookkeeping software, I can allocate $75 to as many vendors as I need.

Let's say the remaining $25 belongs to one vendor. The next month, the same thing happens - I charge $100 but can pay the credit card only $75. it's now the new calendar year and it's time to figure out my business expenses for tax purposes. What do I do about the vendor to whom I did not allocate a payment on the credit card? Is that expense an expense I can claim on my taxes only for the calendar year in which I incurred that expense?

Suppose I allocated a payment to that vendor (let's say I paid the $50 to the credit card company out of cycle) but made the payment in the new calendar year - can I claim the expense in the new year (since that's when I expended cash to "pay" it) or have I simply lost the opportunity to take that expense off my taxes?

Wnhough · #2 (**permalink**) 02-09-2014, 11:52 PM

Quote:

Originally Posted by Barry1156

I am a sole proprietor organized as a LLC. I have a business credit card that I use strictly for business purposes. My question is how to treat expenses for which I have not paid the credit card company. Unfortunately, I am running a balance on the card every month, and with things being the way they are, I can't make much more than the minimum payment on the card (I'm not in default, though). Suppose that I make $100 of business purchases in a given month and pay that bill on time. Each transaction is invoiced against a vendor (postage to the USPS, a monthly software license fee to that vendor, and so on). However, I can only pay the minimum payment, let's say $75.00. in my bookkeeping software, I can allocate $75 to as many vendors as I need.

Let's say the remaining $25 belongs to one vendor. The next month, the same thing happens - I charge $100 but can pay the credit card only $75. it's now the new calendar year and it's time to figure out my business expenses for tax purposes.

#1;What do I do about the vendor to whom I did not allocate a payment on the credit card?

#2;Is that expense an expense I can claim on my taxes only for the calendar year in which I incurred that expense?

#3;Suppose I allocated a payment to that vendor (let's say I paid the $50 to the credit card company out of cycle) but made the payment in the new calendar year - can I claim the expense in the new year (since that's when I expended cash to "pay" it) or have I simply lost the opportunity to take that expense off my taxes?

#1;I guess you need to c/f to the next month/ calendar year until when you can make new payments on the vendors

#2;it depends on your accounting method;th e IRS allows you to calculate your tax bill using one of two tax accounting methods. Most of taxpayers use the cash method. However, most businesses prepare their tax returns using the accrual method. One advantage in using the accrual method is that you can deduct expenses before you pay them. As long as you have a legal liability to make the payment, you can claim a deduction for it in the tax year your liability arises. The cash method rules don’t allow you to deduct expenses that remain unpaid at the end of the tax year, regardless of your legal obligation to pay them.

#3;as mentioned above.