Collected EU VAT is included on 1099-K gross. Should I deduct EU VAT payments as a business expense?

[goog993a]

Collected EU VAT is included on 1099-K gross. Should I deduct EU VAT payments as a business expense?

If so, should I only deduct VAT remitted during that year? For example, Q4 VAT wasn't remitted until Jan of the following year. If using the cash method of accounting, that should not be included, correct?

[JosephS1 · Accepted solution]

Yes, as it does appear you can deduct separately stated value added tax as a business expense if included in the gross proceeds.  It would be similar to deducting the sales tax included in sales here to arrive at a net sales price.

As a suggestion, depending on the type of business return you will be filing, consider listing your sales in full including the VAT and then deducting the VAT identifying it as VAT included in the sales revenue.  Another method would be to list it as an Allowance rather than as a deduction but still identifying it as such.

To be sure, it must be part of a business expense to be in any way deductible.  Personal payments received including VAT are not apparently deductible under any circumstances.  The link below should be of assistance:

Restriction on deductions for VAT

Input tax do's and don'ts

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