I received some income for my consulting work last year. This year the company was audited and some of the income that was paid to me I had to pay back. Do I just adjust my income this year to reflect the money I had to pay back, I use QuickBooks. Thanks for any help.
Marion
If you report your income on a cash basis (most sole proprietors do), then the money you give back should be reported as a business expense on your Schedule C, thus reducing your 2008 income accordingly.
Jim Hammond, EA
consulting work last year. This year the
Does he have the option to use repayment of income (otherwise called claim of right)? If he was in a larger tax bracket last year, then this method might yield a bigger savings.
my consulting work last year. This year the
The link just above bears out what my Texas colleague just said, to wit: "The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. You generally deduct the repayment on the same form or schedule on which you previously reported it as income."
Anyway, why would a proprietor want to treat it any different than on schedule c? The deduction on schedule c also reduces se tax. It's a no brainer.
ChEAr$, Harlan Lunsford, EA n LA
Have something to add? Share your thoughts — no account required.
Ask the community — no account required