|
Posted by jo on December 28, 2006, 8:34 pm
Please log in for more thread options
My clients reimburse minor expenses I incur while doing
genealogy research for them (parking, reproduction..).
Until I invoice them and receive payment, these expenses
appear on my [Quicken] records as categories under Office
Expenses, not as A/R, since I'm on an cash basis. So what
should I do with these expenses that are on my records
across the year end boundary because I haven't invoiced for
them yet?
If I use Quicken's P/L report, they act like any other
expense and offset income. But when i get reimbursed for
them in 2007, those expense categories will be credited,
making it look like I earned income in an expense category
(I've always assumed that's what a negative expense
becomes).
Intuitively, what feels right is to back out any of these
reimbursible expenses on my records, perhaps not in Quicken,
but when doing my Schedule C. Is this proper treatment?
We aren't talking big numbers here. The total amount in the
Parking expense category right now is about $30 and other
reimbursibles are in the same range. I'd just like the
solution to be simple and legal<g>
Thanks, jo
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
|
|
Posted by Stuart A. Bronstein on December 29, 2006, 8:07 am
Please log in for more thread options
> My clients reimburse minor expenses I incur while doing
> genealogy research for them (parking, reproduction..).
> Until I invoice them and receive payment, these expenses
> appear on my [Quicken] records as categories under Office
> Expenses, not as A/R, since I'm on an cash basis. So what
> should I do with these expenses that are on my records
> across the year end boundary because I haven't invoiced for
> them yet?
Contingent fee lawyers run into this problem a lot. The IRS
says that you have to treat the expenses as loans to the
client. So there is no deduction when the expense is made,
and no income when it is paid back.
Stu
Moderator:
In the case of "jo", it would help to work against a
retainer which may be difficult to get.
There is a worse problem in accrual accounting where
billings and retainers become revenue in the period in
which they occur.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
|
|
Posted by Seth Breidbart on December 30, 2006, 2:48 pm
Please log in for more thread options
> Contingent fee lawyers run into this problem a lot. The IRS
> says that you have to treat the expenses as loans to the
> client.
But if they lose the case, the client doesn't have to pay
anything. Is that treated as cancellation of debt income?
Seth
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
|
|
Posted by Stuart A. Bronstein on December 31, 2006, 11:50 pm
Please log in for more thread options sethb@panix.com (Seth Breidbart) wrote:
>> Contingent fee lawyers run into this problem a lot. The IRS
>> says that you have to treat the expenses as loans to the
>> client.
> But if they lose the case, the client doesn't have to pay
> anything. Is that treated as cancellation of debt income?
Under the contract there's no debt if they lose, so probably
not.
I imagine that in that case the lawyer could treat it as an
expense at the time it is clear that it won't be paid back,
similar to an option expiring.
Stu
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
|
|
Posted by Seth Breidbart on January 2, 2007, 4:07 am
Please log in for more thread options > sethb@panix.com (Seth Breidbart) wrote:
>>> Contingent fee lawyers run into this problem a lot. The IRS
>>> says that you have to treat the expenses as loans to the
>>> client.
>> But if they lose the case, the client doesn't have to pay
>> anything. Is that treated as cancellation of debt income?
> Under the contract there's no debt if they lose, so probably
> not.
So the IRS claims that from X's point of view, the payment
is a loan to Y, but from Y's point of view, there is no
debt? Is the IRS allowed to get away with such an
inconsistent position?
> I imagine that in that case the lawyer could treat it as an
> expense at the time it is clear that it won't be paid back,
> similar to an option expiring.
It seems to me the lawyer is paying out money in Year 1 in
hopes (expectation) of receiving more money in Year 2; since
the payments are "ordinary and necessary business expenses"
I'd think they'd be deductible for a cash-basis taxpayer.
Seth
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
|
| Similar Threads | Posted | | Tax treatment of meal expenses reimbursed to contractor | January 31, 2008, 4:17 pm |
| How to handle 1099-R with distribution code P (taxes paid on 2006 return) | April 5, 2008, 2:44 pm |
| How to handle 1099-R with distribution code P (taxes paid on 2006 return) | April 5, 2008, 2:44 pm |
| FSA for reimbursed expense | June 28, 2008, 11:54 pm |
| Health Insurance Premiums reimbursed by divorced spouse | February 5, 2008, 12:15 pm |
| Re: How to handle 1099-Misc | April 12, 2006, 11:28 pm |
| How to handle a ROTH distrbution check? | April 26, 2007, 2:11 am |
| How to handle rounding error on W2, W3, DE 3BHW, DE 3HW? | January 15, 2008, 7:50 pm |
| how to handle cash payment for stock | March 21, 2008, 7:16 pm |
| Best Tax Software to handle various stock & option transactions? | June 21, 2008, 10:46 pm |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap