Can I still deduct these business related items on my 2006 IRS 1040 tax return?

Question

I ordered goods for my business on 12/31/06 but it didnt show up on my bank statement until 1/8/07. Can I still deduct these business related goods/items on my 2006 IRS 1040 tax return?

This order was made online.

I paid for this item/good with my credit card.

Answer 1

MAY BE.

If you are a cash basis taxpayer you have to have PAID for the goods in 2006. If you order office supplies and did not pay for them in 2007 then you deduct them when you tendered payment to the company, not when they cleared your bank account. If you paid on 12/31/06 with a check and it cleared on 1/4/07 then you can deduct them

If you are a accrual basis taxpayer you take the deduction when you use the goods in your business, not when they are paid for (but they must be paid within 3.5 months after year end).

If you ordered the goods on 12/31/06, which was a Saturday, did you give a check, or was it a EFT payment? If it was an EFT then that EFT would be made until the items were actually shipped to you or on the next business day. If so then you get the deduction in 2007. The EFT will be the date on the invoice by the supplier as to when they considered you making payment to them

Answer 2

You are confusing Billing Date of Order, with
payment of Accounts Payable.

Does your credit card show that you ordered the goods on 12/31/06? Yes.

Does your ordering statement show that you ordered the goods on 12/31/06? Yes.

Yes.

It does not matter how, where or when you pay your bills.
It does not matter if you usually are a Pay In CAsh buyer.
It does not matter if you usually pay with a sales agreement that allows you to pay $100 a month until the bill is paid.
It does not matter if you usually pay the minimum on your credit card statement.

That is your Accounts Payable.
It does not matter when you receive the goods - unless you're in a lawsuit for damaged goods, or non-receipt.

The sale is dated 12/31/06, and your order is dated 12/31/2006.
Remember, some people pay their bills - 30 days or more later, yet they are still a sale on the specific ORDERING DATE of the item, some people pay their bills by taking out a loan - as in a "special line of credit" from their bank.
Don't confuse your payment with when you purchase the goods.

Accounting 101
Debit: Purchases
Credit: Accounts Payable
Date - when you made the purchase - not when the items are received.
Otherwise - how would you ever track how much someone in Purchase Dept. - obligated the company for on that date - 12/31/2006.

I hope this helps.

GOD bless us, always.
CPA-retired

Answer 3

When did you pay for them? If they were paid in 2006, they are a 2006 dediction

Answer 4

Yes if your employer has not and will not reimburse you...and if you are self employed! Yes...you may want to check with the bank to find out the day it should have post to your account.

Answer 5

If your receipt is dated in 2006. Then yes. Always make sure your receipts are for the year you file.