LLC business expense: How to handle 2023 purchase exchanged for different item in 2024?

Thanks for explaining that! So even though the money left my account in 2023, since I didn't actually use the item until the exchange in 2024, I should count it as a 2024 expense? What about the $300 difference between what I initially paid and what the correct item cost? Do I need to account for that somehow?

Yes, that's correct. What matters for tax purposes is when the item was placed in service, not when you initially paid for it. Since you never used the original incorrect item for your business, you'll expense the $2,950 in 2024. For the $300 difference, that's essentially a partial refund. You don't need to report it separately - you're simply expensing the final amount of $2,950 in 2024. The $3,250 original payment is irrelevant for tax purposes since that transaction was effectively cancelled and replaced.

Does it actually work for reviewing business expenses? I've got a similar situation with some software I bought and then upgraded a few months later. Would it help categorize which expenses go in which tax year?

I'm a bit confused how this would work. How does it know which receipts belong together? Like if I have a purchase and then a return spanning different months, will it connect them properly?

Yes, it absolutely works for business expenses! The system analyzes your documents and identifies related transactions. For software purchases and upgrades, it would help determine the proper tax year based on when you actually started using each version. For connected transactions across different time periods, that's actually where it really shines. Once you upload your documents, it identifies matching purchase/return/exchange patterns and groups them together, even when they span across different months or tax years. It saved me from incorrectly claiming both transactions which could have been a red flag for an audit.

How does this actually work? Do you just give them your phone number and they call you when they get through to the IRS? Seems weird that this is even necessary but I've been on hold for literally 2+ hours multiple times.

Sounds like a scam tbh. Why would I trust some random service with my tax info when I could just keep calling the IRS myself? How do you know they're not just collecting your information?

You start by entering your phone number on their website, and they call you once they've secured your place in the IRS queue. Then when an IRS agent comes on the line, they connect you directly. You don't have to give them any sensitive tax information - they're just holding your place in line. I was skeptical at first too, but it's not a scam. They don't collect any tax information from you - they're literally just a waiting service. They don't ask for your SSN, tax ID, or anything private. The connection happens only after they've already reached an IRS agent, so you're talking directly to the IRS, not sharing details with a third party. I understand being cautious, but after wasting hours on hold multiple times, this was a genuine lifesaver for getting my LLC tax questions answered.

Yes, you would still expense it in 2024. The tax year for the deduction is based on when you put the item into service for your business, not when the money was spent. If you never used the original item and returned/exchanged it, then the deduction happens in 2024 when you got and started using the correct item.

Thanks for clarifying! That makes sense. I was confused because I technically spent the money in 2023, but I see now that what matters is when I actually started using the item in my business operations.

That's not correct for a straight exchange. If you got a full refund and then made a separate purchase, maybe, but for an exchange of products it's treated as a single corrected transaction. The IRS doesn't expect you to report a refund as income in most cases - especially when it's just correcting a purchase.