F1120S - Because of a refund, my expenses are negative... are my "other deductions" negative?

[Dana2917]

In 2019, I was overcharged $800 for a service; the refund finally arrived months later in 2020.  In 2019 I entered the full amount I was charged as an expense, and in 2020 I entered the refund as a negative amount against that expense.

In 2020, my business expenses were less than the $800 refund so I have a negative amount for line 19, "other deductions".  Is it correct to enter a negative number here?

(I am an s-corp with one employee -- me; I took another job so did very little work for this s-corp so thus the lack of normal expenses.)

Thanks!

[JeffreyR77]

You have two options in this case.  1) as you have reported the refund of the overcharged expense against the expense that was originally overcharged balances that expense category across multiple reporting periods results in your overall expenses being shown as a negative for the year which isn't truly accurate.

Or 2) reporting the refund as 'other income' which doesn't offset the overcharged expense category, but doesn't skew the reporting of your expense volume for the year. 

Either way you have an anomaly to deal with. 

In your bookkeeping, you clearly want to address the situation using the first approach, for taxes, the second option may be a more useful approach.

[Dana2917]

That was very helpful, thanks!  I appreciate your quick reply and attention even though my business is so small!