Can we deduct the Washington state tax we paid for our business?

[Bobbr]

My wife paid about $600 in Washington taxes for her business. We received the Combined Excise Tax Return form. I didn't see where we could specify the deduction for the "State Business and Occupation Tax Total."

(Answer: I specified the state taxes we paid in the "Taxes and Licenses" area of business expenses.)

[GeoffreyG]

As a CPA familiar with the Washington state Business and Occupation Tax (B&O), I can confirm that the tax is both a deductible business expense, and that it appears you have done so correctly by including it in the "Other Common Business Expenses" -> "Taxes and Licenses" section of TurboTax.  That should ensure that the state B&O tax appears on the correct line of your Form 1040 Schedule C (for self-employment).

Thank you for asking this question, and for later figuring out the correct answer for yourself.  You've done very well!

[skidude]

What may be deducted from participating in the DOR Voluntary Disclosure Program - all four (4) years, or just the current tax year?

[theraputty]

Hello-

I'm wondering in what tax year the B&O tax can be deducted on federal tax return.  Specifically, if I don't pay part of my B&O tax for this year until January next year (because I won't know my total receipts until the end of this year), can I take the deduction on this year's tax return -- since that's the year the taxes were paid for -- or do I need to take the deduction on next year's tax return (the year when I wrote the check for the B&O tax).

Thank you!

[JulieS]

It depends on whether you report your income on a cash basis, or accrual. Cash basis is most common for individuals and small businesses.

If you report your business income on a cash basis, you have to report the tax paid as a business expense in the year that it was paid.

If you use the accrual basis, you report the expense as soon as it is due, even if you didn't pay it yet. Click here to learn more.