Credit card payment of bill

[thomtax]

I am almost positive, in my mind, that I have read that if a cash basis taxpayer pays for a deductible item with a credit card, it can be considered as having paid cash. However, I am unable to find where I read it. Can anyone confirm or refute this?

If this is true, then on a schedule c, would this also be the case?

Thanks in advance for your advice.

LT

[Brian EA]

[QUOTE=thomtax;31502]I am almost positive, in my mind, that I have read that if a cash basis taxpayer pays for a deductible item with a credit card, it can be considered as having paid cash. However, I am unable to find where I read it. Can anyone confirm or refute this?

If this is true, then on a schedule c, would this also be the case?


YES

It is considered PAID on the date of the transaction.Payment to the credit card company has no bearing on the transaction.

[gkaiseril]

See page 133 of Pub 17 for use of Credit Card for medical expenses.
See pages 155 and 157 of Pub 17 for use of Credit Card for charitable contributions.
See page 189 for use of Credit Card for payment of tax preparation.

In Pub 334 all businesses recognize credit card payment when charged like cash, but are allowed to deduct paybacks for canceled charges.

From IRS Pub 583:

Purchases. Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Documents for purchases include the following.
Canceled checks.

Cash register tape receipts.

Credit card sales slips.

Invoices.

These records will help you determine the value of your inventory at the end of the year. See Publication 538 for information on methods for valuing inventory.

Expenses. Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following.
Canceled checks.

Cash register tapes.

Account statements.

Credit card sales slips.

Invoices.

Petty cash slips for small cash payments. "

Since all businesses including cash basis must recognize credit card receipts when charged the expensed have to recognized on the same basis. Further the IRS knows that the credit charge will be paid by the taxpayer or the taxpayer will pay the income taxes on the credit card debt that is canceled, form 1099-C.