Response to your follow-up questions:
- Reread my original reply. It stated that transactions are only recorded when there is an actual change in cash and you do not record any accounts receivable or payables (not reflected on the balance sheet).
- In the original question, there is an exception to the general rule for the year in which you are able to deduct your 401k. That is why I indicated to put that on the balance sheet to simplify the accounting.
- Your other questions (follow-up post) related to payroll taxes and credit card expenses:
- Employer payroll taxes that have accrued but not paid until 2023 are not deductible and should not be on the balance sheet.
- Credit card expenses are not deductible until paid.
- Employee withholdings are technically wages. If the wages have been paid, but you have not remitted the withholdings, you could reflect these on the balance sheet.
- What you are able to do is maintain your books and records on the accrual basis and your tax return on the cash basis; assumption is that you are eligible. This would require book to tax adjustments on Schedule M-1, but provide a better understanding of the business on the balance sheet.
- You may want to visit with a tax professional to get some guidance to help you understand the best bookkeeping method for you and how to account for it.
- At the end of the day, don't get too hung up on the balance sheet presentation as long as the tax return bottom line is correct; meaning page 1, Sch K and K-1.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
