I charged a customer $2,700 for something in December 2018 and had to issue a full refund for it in January 2019. How do I handle that on my taxes?

[Kris4]

I'm not sure if there's anything I can do about it on my 2018 taxes, or if I have to wait until I do my 2019 taxes.

[MichaelMc · Accepted solution]

The customer's payment to you in December 2018 must be included in income for tax purposes in 2018. Your refund in 2019 will be a reduction of income on your 2019 tax return.

[Kris4]

That's what I suspected. Is there a special place — specifically in TurboTax — to denote the refund, or do I just subtract the amount from my taxable income?

[Cindy0H]

It is considered returns and allowances which is entered under Business Income: Income You Gave Back.

[Kris4]

Thanks Michael and Cindy!