Should this credit reduce business deductions?

A client made a personal purchase on his business credit card in 2019. Now, on a recent credit card statement in 2020, there is a credit for that personal purchase. For whatever reason, he got the money back. In actuality, the total amount that he now pays for business purchases for this recent credit card statement in 2020 is reduced by this credit. Should the credit reduce the total amount of business expenses in 2020 that will be deductible on his Schedule C or should the credit have no effect on his 2020 Schedule C?

Just because the purchase was on his business credit card is no reason that it was ever a on his tax return as a business deduction in the first place. The personal purchase should have been recorded on the balance sheet as a receivable. If this tax client doesn't present a full BS/PL sort of books, then the personal expenses is simply not included in business deductions in 2019.

I agree with Joan. If this client is a schedule C, then it's easy enough to book the charge to the drawing account and the credit to the same account. It should have no impact on the income statement. I have a client who is always doing this throughout the year. They try to be very careful, but every so often the wrong card is used. I just book that charge to the drawing accoutn. As Joan says though, you could book it as a receivable, but in my experiece, a SP isn't going to repay that with a check and in the end it gets eliminated witha journal entrty to the drawing account.

But just suppose he accidentally deducted it in 2019. Now what does he do in 2020? Hmm?

One thought would be to reduce the expenses in 2020, so that in the two years, he is where he should be. Of course, this isn't right either, so do two wrongs make a right? But perhaps "consistency" in that he "always uses the total on the credit card" so this method would follow that thinking... (but that is still not really a very good position to declare...).

The other thought is that the one return is wrong, let it lie -- don't compound it by making another return wrong, also.

Lastly, if the item is immaterial (OP didn't tell us), then I probably wouldn't sweat it either way. Whatever the client wants, in that case -- who cares. A great deal of this discussion would depend on the materiality.

And, yes Action, if it is a Schedule C (again, OP didn't tell us) and he actually uses QB or something, just book both entries to draw and be done.

OP does state in the last sentence of the comment that the taxpayer is a Schedule C filer. If the credit card is properly reconciled, then the personal charge should have been caught so it could be classified as a draw and the credit would also be properly posted to the draw. It shouldn't matter if the two events happened in different years for a SP.