Can I deduct an item in 2020 that I paid for in 2021?

I own a small business that uses a cost method to value inventory. On around October 20th, 2020 I took delivery of an item that I sold shortly thereafter. I paid for this item with a 30% deposit and mailed the remaining balance on November 23, 2020 (for which I have a check # and payment voucher). On January 18, 2021, the vendor from whom I had purchased the item notified me that 70% balance payment had not been received. I immediately stopped payment on the check and wired the full amount owed. Considering the circumstances, can I expense the 70% balance payment in the 2020 tax year?

posted

Yes, you can expense it in 2020 as you had made the payment available to the recipient. It is not your fault that it got lost in the mail or maybe even lost by the recipient. You just need to keep the check stub or other evidence that the payment had been sent before the New Year.

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