What is the proper way to record an expense paid by check when the check was not deposited until the following year?

[ptyler44]

I use the cash basis for my LLC business.  I paid an expense in late 2022 by check, and reported this expense on my 2022 taxes, but my check did not clear the bank until 2023 after my 2022 tax return was filed.  What if any correction needs to be made in my accounting or my taxes to reflect this?

[M-MTax]

What if any correction needs to be made in my accounting or my taxes to reflect this?

No correction needed if you handed the check to the other party or put it in the mail before the end of 2022.

[ptyler44]

Thank you M-MTax for your reply.  The check has now cleared and the expense is recorded in 2023.  Is there anything I need to do in Quickbooks so that this expense is not counted twice (i.e. once in 2022 and then again in 2023).; or do I just reduce my total expenses in 2023 by the expense that has already been reported on my taxes in 2022?

[M-MTax]

Not sure about Quickbooks  but make sure you don't report the deduction on your 2023 return since you already took it in 2022.

[Opus 17]

For you as the payer, the funds are paid (for tax purposes) when they leave your control.  For example, if you mail a check on December 29, and there are funds in your account, then it is a December expense even if the payee does not cash the check until January.  (However, if you mail the check on the 29th, but the check is post-dated to January, or there are no funds in the account until January and you verbally instruct the payee to wait--or you are taking advantage of the holiday delays to not deposit the funds until January--then the funds did not leave your control until January and are a January expense on your business tax return.  

I don't think we can help much with Quickbooks, there is a separate support forum for that.  However, I would imagine that if your expense occurs in December, that's when it should be recorded, even if the check was not deposited until later. 

[M-MTax]

Also, if you downloaded transactions from your bank or financial institution into Quickbooks for 2023, you'll have to somehow delete or reverse the entry for that particular check.

@ptyler44 

[VolvoGirl]

I don't think you have to worry about that.  If QuickBooks is like Quicken when it clears and downloads from the bank it should match the check already in your register, not create a new transaction.  

[M-MTax]

it should match the check already in your register, not create a new transaction.  

Except @ptyler44 said, "The check has now cleared and the expense is recorded in 2023" so it could be that another entry was made for 2023. Not familiar with QB so.....

[ptyler44]

Thank you all.  This has helped me a lot!!