How can I deduct my Final Sales Tax after Closing my Business?

[mofhasan]

Hi There!

I wanted to know if there is a way to deduct or report the Final Sales Tax paid on 01/2020 as an expense for the business that was closed on 12/2019. 

When filing the annual business tax for 2019 using TurboTax self-employed, I reported the business as closed in 2019. I didnt include the Final Sales Tax paid as an expense on that 2019 Tax return, as I did not pay it until 2020. 

Now, when using the TurboTax service, the business is now gone from the list and I am unsure of how to deduct this Final Sales Tax. 

Is there a way to still include it in my 2020 tax return, or did I lose the deduction?

If there is a way to deduct this, how may I do so using TurboTax Self-Employed? I am having a hard time finding the place to put this in. 

Thank you very much in advanced!

[ColeenD3 · Accepted solution]

I'm assuming you collected sales tax from customers and included it in income.

Yes.

From the Bradford Tax Institute 

In the instant case, expenses represented by the debts would have been deductible under section 162 of the Code had they been paid by the taxpayer while he was still carrying on the business. The fact that the business has been discontinued does not prevent the deduction of expenses otherwise allowable to an individual taxpayer using the cash receipts and disbursements method of accounting. See Waters F. Burrows v. Commissioner,38 B.T.A. 236 (1938), acquiescence, C.B. 1938-2, 5.

@mofhasan

[Edited 3/2/21 | 12:10PM EST]

[Opus 17 · Accepted solution]

I would think in this limited case, yes.  File a schedule C with the expense only, which will create a loss against your other income.  If you had paid the tax on 12/31/2019 instead of 1/2/2020 (or whenever the exact date was) it would have decreased your taxable gain or increased your NOL for 2019, so I don't see an issue now.  (It certainly would have been much more sensible to pay the tax before 12/31/2019 if you knew you were closing the business.)

You can't list expenses and deduct losses indefinitely, but here you have a perfectly good explanation.