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rchavez1668
New Member

I gifted a customer $500 last year. Do I note that as a refund/rebate?

 
9 Replies
Carl
Level 15

I gifted a customer $500 last year. Do I note that as a refund/rebate?

Neither. A gift is just that - a gift. Same as if you purchased a $500 birthday present for your neighbor's child. Nothing gets reported anywhere, to any taxing authority.
Critter
Level 15

I gifted a customer $500 last year. Do I note that as a refund/rebate?

If you file a Sch C then the "gift" is a personal expense and cannot be deducted on the Sch C. 

TaxGuyBill
Level 9

I gifted a customer $500 last year. Do I note that as a refund/rebate?

If the Gift was to a customer, you can deduct $25 per person (per year) as a business expense.
rchavez1668
New Member

I gifted a customer $500 last year. Do I note that as a refund/rebate?

Thank you for your response. I used the word "gift" although I truly don't know how to categorize this. A customer who was going through a difficult time needed assistance, so I gave/lent/donated them $500 with expectation that they would pay it back or possibly do some work for me to work it off. Neither has transpired and I'm looking to see how I can write it off as a loss?
Carl
Level 15

I gifted a customer $500 last year. Do I note that as a refund/rebate?

If you did at least $500 worth of business with that customer in the tax year, then you can enter the "refunded" amount in the COGS section (I'm assuming you have inventory) in the "Returns and Allowances" box.
rchavez1668
New Member

I gifted a customer $500 last year. Do I note that as a refund/rebate?

I don't have inventory. I sell insurance, but yes I did make more than $500 from them last year. Thanks again in advance.
VolvoGirl
Level 15

I gifted a customer $500 last year. Do I note that as a refund/rebate?

You can't deduct income you never received.  You will just have less income to be taxed on.  You take the loss by still deducting all your expenses but not your time or labor.  Unless you entered the full amount before the discount as income, then you can deduct the discount under Advertising or Misc Expense.
TaxGuyBill
Level 9

I gifted a customer $500 last year. Do I note that as a refund/rebate?

Now it sounds like you made a loan.

Was the purpose of the loan to further your business (such as keeping the client)?
Have you diligently tried to collect this loan?
Carl
Level 15

I gifted a customer $500 last year. Do I note that as a refund/rebate?

As I understand it, in order to be able to deduct an unpaid or uncollectable loan, the lender needs to issue the borrower a 1099-C. Of course, all this would require the loan have been a legally written agreement with the payback method, timeframe and options clearly spelled out.
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