another tax question

[okiemom2008]

My husband and I used on of the credit cards we are discharging in bk for business expenses. Things like gas, food, and paying some of the inventory bills.

When I file my taxes can I use the charges on the cc as expenses even though we are discharging the credit card in bankruptcy?

Thanks

[Never_Again]

You can use the expenses on your business schedule C still. They are business expenses in the year paid.

Some expenses have to actually have the cash paid in order to count as expenses in that year. How bankruptcy affects those is a different story.

Since I am familiar with the business that you are involved in, I would say go ahead and deduct the fuel and other cash type expenses. Inventory is figured differently on your schedule C, and has to be calculated as a COGS (Cost of goods sold.) This is where you take last years closing balance of inventory, add in purchases, subtract inventory balance at the end of the year, and enter the amount on Schedule C line 4 which is subtracted from sales to give you gross profit. You do not deduct your inventory bills directly, as you would fuel, insurance, or the like.

I would figure the tax return normally, as if you were not filing, and go from there. If you have any doubts or questions, you might want to run them by an accountant.

[Flamingo]

My husband and I used on of the credit cards we are discharging in bk for business expenses. Things like gas, food, and paying some of the inventory bills.

When I file my taxes can I use the charges on the cc as expenses even though we are discharging the credit card in bankruptcy?

Thanks

You are talking tax law here...most people who itemize on their taxes and have filed BK during that tax year have not utilized their credit cards for donations to charity or other expenses that could be included in itemzing on their taxes as they were in financial difficulty during that time and should not have made those charges. I would suggest either speaking with your BK attorney or if you had a CPA in the past do your business taxes and expenses, to speak with him/her, or consult a tax attorney.

[okiemom2008]

You can use the expenses on your business schedule C still. They are business expenses in the year paid.

Some expenses have to actually have the cash paid in order to count as expenses in that year. How bankruptcy affects those is a different story.

Since I am familiar with the business that you are involved in, I would say go ahead and deduct the fuel and other cash type expenses. Inventory is figured differently on your schedule C, and has to be calculated as a COGS (Cost of goods sold.) This is where you take last years closing balance of inventory, add in purchases, subtract inventory balance at the end of the year, and enter the amount on Schedule C line 4 which is subtracted from sales to give you gross profit. You do not deduct your inventory bills directly, as you would fuel, insurance, or the like.

I would figure the tax return normally, as if you were not filing, and go from there. If you have any doubts or questions, you might want to run them by an accountant.

Ok, thanks so much(again! lol) We use TurboTax online and are trying to figure out what expenses to use but since we were only doing it a short amount of time(3 months ) it should not be that hard but it is so confusing. Thanks!

[Flamingo]

Since you are flirting with BK and tax law, do yourself a favor and consult a CPA and/or tax attorney before you take anything for granted. Or you may just find yourself in an audit and if you do and have the correct advice, you will be fine.

[okiemom2008]

Since you are flirting with BK and tax law, do yourself a favor and consult a CPA and/or tax attorney before you take anything for granted. Or you may just find yourself in an audit and if you do and have the correct advice, you will be fine.

I could do that but really cannot afford it as it is about 200.00 just to talk to one.

[Flamingo]

I could do that but really cannot afford it as it is about 200.00 just to talk to one.

Have you spoken with your BK attorney? He/she should be familiar with this and/or your specific situation and sometimes they consult others in their firm or colleagues for information that will not cost you a cent and is legal advice direct from your attorney that would protect you in the event of an audit. Just a suggestion to protect you - you don't have to do it if you don't want...advising an IRS agent you obtained the info online doesn't go over as well as being advised by your attorney or your CPA...The IRS eyes returns and BK very carefully as you will have to submit final returns for the year you file BK which I am assuming will be for 2009 so they would check out 2008.

[okiemom2008]

Have you spoken with your BK attorney? He/she should be familiar with this and/or your specific situation and sometimes they consult others in their firm or colleagues for information that will not cost you a cent and is legal advice direct from your attorney that would protect you in the event of an audit. Just a suggestion to protect you - you don't have to do it if you don't want...advising an IRS agent you obtained the info online doesn't go over as well as being advised by your attorney or your CPA...The IRS eyes returns and BK very carefully as you will have to submit final returns for the year you file BK which I am assuming will be for 2009 so they would check out 2008.

I will definetly check into that. I talked to my lawyer about filing our taxes before we file but he never mentioned anything about it. Thanks so much

[HHM]

You incurred the expense, you can claim the expense on your Taxes. I am not aware of any special rules regarding the discharge of expenses that were charged on credit cards.

[Flamingo]

You incurred the expense, you can claim the expense on your Taxes. I am not aware of any special rules regarding the discharge of expenses that were charged on credit cards.

I am reading that they put business expenses on their personal credit cards. In our own filing (not business), our attorney asked us if we charged anything on our credit cards that would be included as itemized deductions in our return for that year. We did not have any so I did not question it further. I am assuming there could be tax consequences involved or fraud of some nature....

[okiemom2008]

I am reading that they put business expenses on their personal credit cards. In our own filing (not business), our attorney asked us if we charged anything on our credit cards that would be included as itemized deductions in our return for that year. We did not have any so I did not question it further. I am assuming there could be tax consequences involved or fraud of some nature....

That is exactly what I am hoping does not happen. Basically we had to go to "training" for the job and it was NOT paid for. So all that was put on a personal credit card. And it was 2 weeks 14 hours away from home so it added up.

And we thought everything was going to work out with the business so we would pay our inventory bill with our personal credit card so we could get the "points". Then same day we would deduct the same amount out of checking and pay the credit card. So real confusing...hindsight is 20/20

[HHM]

I am reading that they put business expenses on their personal credit cards. In our own filing (not business), our attorney asked us if we charged anything on our credit cards that would be included as itemized deductions in our return for that year. We did not have any so I did not question it further. I am assuming there could be tax consequences involved or fraud of some nature....

The attorne may just be trying to figure out if your debt is primarily business debt. Even if you charge business exp. on your personally CC, if it is the type of expense you would list on Schedule C, you can use it in the calculation to determine if you are a non-consumer chap. 7.

[okiemom2008]

The attorne may just be trying to figure out if your debt is primarily business debt. Even if you charge business exp. on your personally CC, if it is the type of expense you would list on Schedule C, you can use it in the calculation to determine if you are a non-consumer chap. 7.

So would I be able to use it as expenses on my tax refund?

[Never_Again]

The attorne may just be trying to figure out if your debt is primarily business debt. Even if you charge business exp. on your personally CC, if it is the type of expense you would list on Schedule C, you can use it in the calculation to determine if you are a non-consumer chap. 7.

Agreed. I was told the same thing by our lawyer. I still filed personally, as we were within the means test, but if we had not been, a business filing would have been able to be used.

Three months is a real bummer! I have heard one too many DMs for that "franchise" (which will remain nameless) "advise" people on how to operate that business. Most of them have never been in business themselves, and don't have half of a clue. But, putting the "training" expenses on a credit card, telling people that you don't need back up capital, because the business will make money from day one, and paying inventory dollars with credit cards to get the miles so that you can attend their annual trade show are just three pieces of advice that they give, that could be done better.

[Never_Again]

So would I be able to use it as expenses on my tax refund?

With all of the disclaimers that have been put on here... yes, you can.

They are expenses incurred.