When my girlfriend's client's check bounces and there's a $35 overdraft fee charged to my girlfriend but the client - he's a nice guy, see, like me, but he *does not* get to drive her car - pays her $35 as a reimbursement for the OD fee, is that $35 he paid her taxable income to her?
And please don't tell me it's a gift - that's how a girlfriend becomes an ex-girlfriend.
Expense reimbursement. Not income.
But it does reduce her deductible business expense for bank charges.
Katie in San Diego
Agreed.
As soon as I read this I started laughing because which would you rather have $35 or a $35 deduction?
Since she has client's she is on a Schedule C. So she declares the reimbursement as income and it offsets the bank charges.
Dick
===It is not income to her and not a deductible expense to him. If her account is used for business only, then the fee would be a deductible expense for her. The money received would be no different based on the reason than if it had been given to her as a gift or as a reimbursement of something like the cleaning bill for a dress that had mud splattered on it by the donor's car.
I have to disagree. What we have here is a business expense and a reimbursement even if she is ignorant enough to use a personal account for business.
Also the reimbursement is deductible to her client if he is a business.
Dick
wrote
It's income to her business reported on her business return and a corresponding deduction on her business return. In the end it's a wash.
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