We receive our monthly statements from our vendors the first day of the new month. I have paid all of our outstanding invoices as of 12-27-2022 in order to keep the purchase and expense for our tax return in the same calendar year. But, if we place orders today and tomorrow, we will be "purchasing" them in 2022, but will not receive the order until Jan. 2023, which means payment for those orders would take place in a different calendar year. So does payment for those orders count as an expense for 2023, since that is when the payment will take place? even though the order for those items occurred in 2022? or can you explain how this should be done in order for it to be correct on our tax return? As I understand it now, for the tax return, the purchase would be accounted for in 2022, and then whatever payments occur in 2023 would have to be an expense for 2023, and will not count as an expense for 2022, even though they were ordered in Dec. 2022. Is this correct?
If you are a cash basis taxpayer, you deduct expenses in the tax year in which they are paid.
See https://www.irs.gov/publications/p538#en_US_202112_publink1000270634
If you are a cash basis taxpayer, you deduct expenses in the tax year in which they are paid.
See https://www.irs.gov/publications/p538#en_US_202112_publink1000270634