DISQUS

Buckeyes4Life · 2 years ago

I'm confused...why didn't you deduct $4768 -- option 3? Like you pointed out, inflation devalues future refunds so why not go for more cash now?

Adam Pieniazek · 2 years ago

You're right...if I went with option 3 I'd get a larger refund, but there were two main reasons I didn't do so:

A) I'd get hammered in taxes for 2007 because I'd have to post a $1200 reimbursement for the Umass class in addition to the $1636 reimbursement for the Northeastern classes while the expense for both of these would have already been claimed. In other words, I'd have to subtract $2863 from tuition expenses before I even began claiming tuition expenses.

B) I believe my method is the most accurate and most in line with generally accepted accounting principles. It's logical, I received the reimbursement in 2007 and paid the tuition cost in 2007. It's true that the reimbursement is for an expense paid in 2006 and the tuition was paid for with money I earned in 2006 but it's still backdating; I'd rather keep my costs and reimbursements in the actual year they happened.

Hope that makes sense?

TedfromAccounting · 2 years ago

If you're going to have tuition costs that you don't get re-paid by your work, why wouldn't you claim the reimbursed amounts in '06 so your '07 return actually benefits from the unreimbursed tuition?

Adam Pieniazek · 2 years ago

Short answer, I wanted to get some kind of substantial refund this year.

Long answer, I'm expecting to incur losses in '07 from a business I'm starting with three of my friends (see my first post ever) and if I had claimed the reimbursement in '06, I risked having un-used tax credits/deductions in '07. Keeping the reimbursement in '07 increases my tax liability which will probably be offset by the business losses.

Oh, and I'm not expecting to lose money because our business is not profitable but rather I foresee some significant up front costs to the business (hopefully not too much!).