When I make these payments, the liability is reduced, cash is reduced, but my net income is not reduced on the current statement - this is correct. The expenses are already recorded on the income statement when you make the credit card transactions. The payments made on the credit card do not hit the income statement, they would hit the balance sheet. Both of these accounts are balance sheet accounts.
DR Business Expenses XXXX
CR Credit Card liability account XXXX
On my last tax return, the items purchased on the credit card, were not reflected in my expenses. So I am confused, that I am now paying on liability was not expensed. - I believe the credit card expenses were being expensed on the income statement. How else would the credit card liability be on the balance sheet? You need a debit somewhere to make a credit on the balance sheet. You could review your records to ensure that the expenses are in fact hitting your income statement but I am quite certain they are.
Note that there will be a timing difference between actual cash paid for the credit card balance and the actual credit card transactions. The credit card transactions are deductible in the year made. The payments on the credit card have no effect on the income statement, it merely a balance sheet entry, no income tax effect.
I hope this helps make it more clear, please let me know if you have any further questions.