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Wendy Asked About 'Online Tax Advice From Tax Advisers - WalletPop'

Hello, I am entering a persons expenses for the ...

Hello, I am entering a persons expenses for the year. I will then print a report and give to him for his accountant. My question has to do with credit card interest. His credit card has mostly business expenses, and some personal expenses. How do I post this? Orinally I took each statement and found the percentage of business & personal expenses and applied that percentage to that credit card interest charge. Now, as I am thinking about it, this is not right. I am totally confused as to how to handle this. Should I total the business expenses for the year & use that interest rate? Am I able to write off the interest every month even though the interest for certain expenses were created the month before? I looked at his tax return from last year & the interest was only about $3000. Only a fraction as to what he paid. I appreciate any feedback you can provide. Thank you, Wendy

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Tax Fairy Answered:

The IRS hates it when you commingle funds. You have to be able to allocate the interest payments between business and personal in order to deduct them and, as you've found, it's extremely difficult to do. This person should be using one card for business and another other for personal, especially since they're carrying a balance. In order to figure the interest rate properly, you'd also have to allocate the payment. My suggestion is to break out the bills into business, personal, and total interest, write the accountant a note, and let them decide what to do with it.

Posted 3 years ago

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