Is a retainer tax deductible?
Is a retainer tax deductible?
A retainer is an asset. It merely changes form, from cash in bank to cash in lawyers trust account until it is billed against., at which point it becomes an expense and if deductible, becomes a deductible expense.
Do retainers have HST?
If products are delivered before the transition date, then HST will not apply. For companies taking deposits or retainers, it is important to determine when the product or service will be delivered. If delivery occurs after the transition date, then HST should be applied to the prepayment.
Is a cash advance considered income?
Merchant cash advances are not loans and, therefore, are not reported as income. At the time the advance is made, the money received from the cash advance is not subject to tax. However, income that is used to repay the cash advance provider is considered income and therefore taxable.
Do deposits count as income?
If the money is refundable, you treat it (for both accounting and tax purposes) as a deposit, and deposits are excluded from income for federal income tax calculations.
Can a cash basis taxpayer deduct prepaid expenses?
Most individuals and many small businesses use the cash basis method of accounting. The general rule is that you can’t prepay business expenses for a future year and deduct them from the current year’s taxes. An expense you pay in advance can be deducted only in the year or years to which it applies.
What is the 12-month rule for prepaid expenses?
The 12-Month Rule The “12-month rule” allows for the deduction of a prepaid expense in the current year if the right or benefit paid for does not extend beyond the earlier of: 12 months, or. the end of the taxable year following the taxable year in which the payment is made.
What Prepaid expenses are deductible for tax?
Certain expenses such as insurance, rebates, and licenses can be prepaid before year-end without needing to be capitalized for tax purposes, thus allowing a tax deduction for the current tax year. The 12-month rule must satisfy the requirements of economic performance in order to be utilized.
