Hello tmason,
When you say you had business deductions, was this from a business that you actually own or from self employment?
Or were these business expenses you had on a regular job that were not reimbursed by your employer?
Where did your accountant report your earnings?
Hello again tmason,
One more question please. How exactly is your business set up? Are you established as a single member LLC, partnership, S Corp, C Corp?
If you paid business expenses for your C Corp out of your own personal funds, and you were not reimbursed for those expenses, then these would be deducted on Schedule A of your return, and not on Schedule C. Schedule C is only used for unincorporated businesses such as sole proprietors, and they report both their income and their expenses on that schedule.
If you have a C Corp, then the C Corp itself should have filed a tax return on Form 1120 and reported all income and expenses of the business, and paid taxes on its net profits. Wages that were paid to you by the C Corp should have been reported on a W-2 form and then reported on line 7 of your Form 1040. Any business expenses you had which were not reimbursed by the C Corp would be claimed on Schedule A of your tax return.
If this is not how your returns were handled, then you should amend your returns to reflect the proper procedures. If your returns were filed in this manner, then you will just have to wait until the IRS finishes their examination, at which time they will either issue your refund or they will notify you if additional information is needed to process your return.
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Thank you tmason.
I understand that I need to file a schedule A instead of a schedule c. Under the examination, do they normally require to produce the receipts of the unreimbursed expenses or the checks where I paid the unreimbursed expenses? I'm just asking so that I can go ahead and have that information already gathered.
Whatever expenses that you had which were not reimbursed, you should have receipts for. I am not sure what types of expenses you are claiming, but this might be things such as mileage expenses you had for personal use of your vehicle, or office supplies you purchased. Whatever the expenses are that you claimed, you would just need to have receipts to cover those expenses.
You may also use things such as cancelled checks or credit card statements, however, it is helpful to have the actual receipt for the expense, otherwise there is a chance some of your deductions could be disallowed, if it is not clear from the cancelled check or credit card statement just exactly what expense was covered. As an example -- if you purchased office supplies from WalMart, you would need a receipt detailing the purchase, rather than just a credit card receipt for a WalMart purchase which could have been for anything from clothing to a TV set.
Thank you tmason
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad