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Posted by D. Stussy on June 27, 2006, 12:38 pm
Please log in for more thread options Nan, EA in LA wrote:
> If I understand you correctly - neither - since all the
> payments FOR 2005 were paid in 2006. Schedule A is purely
> calendar basis. Not accrual. You deduct on Schedule A only
> those state taxes PAID IN 2005, no matter what year they
> were for.
As to the accounting method used on schedule A, I must
disagree. It is whatever method the taxpayer has chosen
within the meaning of IRC 446. Although 446(d) allows a
taxpayer to have a differing method for each trade or
business from each other and/or his MAIN METHOD, there is
absolutely nothing in the IRC itself that mandates itemized
deductions as a whole to be cash basis only. I shall grant
that there are certain itemized deductions that seem as if
they are "cash basis" (e.g. contributions - requiring a
completed gift), but there are others that have no such
requirement (e.g. taxes, especially real estate property
tax).
> We run into problems with clients who pay their 4 estimates
> according to the date on the vouchers, and don't understand
> why we use what they paid to California in January 2005 FOR
> THE FOURTH PAYMENT FOR 2004, and don't use the 4th payment
> for 2005 made in January 2006.
>
> Withholding, on the other hand, is always paid within the
> calendar year.
True only because all your individual clients are cash basis
for their non-business affairs (as is 99% of the population,
but there are a few who are not).
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