Client refund issue for 2012 taxes


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A client of mine sent me by mistake a double payment for an old invoice in July they thought was due. Their payment was dated December 2012. I found this out early this year and issued them a refund promptly for the same amount, but my check is dated January 2013.

Do I need to report their double payment as income for 2012 even though it's a mistake? Obviously it doesn't balance out for tax purposes since my refund was issued in 2013.

Thank you for any advice.
 
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kirby

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If you are a cash method taxpayer then you indeed were paid twice in 2012. If you are an accrual method taxpayer you were still paid twice but you can record a dr to income and a cr to liability for overpayment
 
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Thanks Kirby. Not sure what those terms mean. I know that I make estimated quarterly payments, does that mean I am an "accrual method taxpayer"?
 

kirby

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No, that does not mean that. If you do your own taxes and are not familiar with accruals then you must be on the cash method. If someone else does your taxes ask them what method you use.
 
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