Using his bank credit card,Seneca,a cash method taxpayer,charged a business expense on December 5,2010.He paid the credit card bill,which included the charge,on January 23,2011.Seneca can deduct the expense in 2010.

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According to the cash basis method of accounting, expenses are deductible in the year they are paid. In this case, Seneca paid the credit card bill (including the business expense) in January 2011, so he can deduct it on his 2011 tax return. However, there is an exception for credit card charges where the expenses were incurred in one tax year but paid in the following year. The IRS considers these expenses to be paid in the year they were charged, which means Seneca can deduct the expense on his 2010 tax return.

Using His Bank Credit Card,Seneca,a Cash Method Taxpayer,charged a Business