topic Re: What can I expense? Credit card balance, or amount I've paid towards credit card in Business Credit

What can I expense? Credit card balance, or amount I've paid towards credit card

Anonymous — Thu, 04 Oct 2012 04:22:43 GMT

My husband has a small side LLC that he uses for freelance work. I manage the accounting with the assistance of TurboTax.

Back in April we opened a Comerica Business credit card that offered 0% interest for 12 months. Previously we used a personal credit card that we kind of "isolated" for business-only expenses, and always paid in full each month. Since this card offers an intro rate, we've run a balance...

Dumb question, if I don't pay off the full balance in 2012, would I only be able to expense the amount that I've paid off on the credit card this year, or would I be able to expense all 'charges' on the card from 2012? It seems that it would have to be the former, but just checking. I've never had had anything on credit for the business, so I'm just a little unsure of how to do it since we may run a small balance (< $2,000) into 2013.

Thanks!

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

llecs — Thu, 04 Oct 2012 05:01:36 GMT

If your accounting is on an accrual-basis, then you can base it off the charges over the course of the year. Even if you did a cash-basis accounting, you can't necessarily deduct 100% of the payments because some of the charges might not be 100% deductible like meals, shared utilities in a home office, car expenses if also used for personal use, cell phone if personal calls are made, etc.

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

Anonymous — Thu, 04 Oct 2012 05:07:47 GMT

Thanks Ilecs!

I forgot to mention, we are on a cash accounting basis.

As far as some things being partially personal and not able to be expensed fully -- we had that scenario before, but since it was always paid in full I just deducted the % that was business. I'd do the same with this, too. However, my main question is, if I don't pay the full balance of my business credit card by the end of 2012, it would technically "carry over" into being a 2013 expenses, correct? I can't techically "expense" business credit card expenses that haven't been paid yet (as in, I haven't paid the credit card balance fully).

Hope this makes sense, it's kind of a funky thing to explain.

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

llecs — Thu, 04 Oct 2012 05:29:39 GMT

Right. If you haven't paid for it, you can't deduct it using the cash-basis.

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

Anonymous — Thu, 04 Oct 2012 05:30:22 GMT

Cool, thanks so much. What I thought, but just being sure.

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

sccredit — Mon, 08 Oct 2012 18:31:50 GMT

That actually is

@llecs wrote:
Right. If you haven't paid for it, you can't deduct it using the cash-basis.

not 100% correct. The IRS assumes that once an item is paid for on a credit card it is, at that point, paid for.

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

Anonymous — Mon, 08 Oct 2012 23:22:37 GMT

@sccredit wrote:
That actually is
@llecs wrote:
Right. If you haven't paid for it, you can't deduct it using the cash-basis.

not 100% correct. The IRS assumes that once an item is paid for on a credit card it is, at that point, paid for.

Wait... really?? Now I'm confused.

It doesn't seem likely to me that the IRS would allow expenses to be written off prior to being actually paid (as in, expensing a balance left on a credit card).

Re: What can I expense? Credit card balance, or amount I've paid towards credit card

sccredit — Mon, 08 Oct 2012 23:37:46 GMT

@Anonymous wrote:
@sccredit wrote:
That actually is
@llecs wrote:
Right. If you haven't paid for it, you can't deduct it using the cash-basis.

not 100% correct. The IRS assumes that once an item is paid for on a credit card it is, at that point, paid for.
Wait... really?? Now I'm confused.

It doesn't seem likely to me that the IRS would allow expenses to be written off prior to being actually paid (as in, expensing a balance left on a credit card).

http://www.ehow.com/info_7797102_cashbasis-time-credit-card-charge.html

I think this simplifies it.