I work as a consultant and collect AFTER the transaction was successful. I am filing 2013, now, on an extension. The work and expense was started and performed mostly in 2013 yet wasn't paid until 2014. I wish to report the income on the 2013 return and pay what I owe asap. Is this ok to do and will it cause any conflict when the client submits their 1099 end of 2014? (it was for far more than $600). Thank you.
USA When and how to report SE income:
- Thread starter fran777
- Start date
If you are a cash basis taxpayer, then your income is taxed in the year of your actual receipt of payment. So that is 2014. As things stand right now (again if you are a cash basis taxpayer) your income is 2014 income and will match with your client's 2014 1099.
What determines cash basis or accrual? I'd rather report and pay asap but will anything be a problem with my client's 1099 reporting?
I know that you can elect for cash or accrual for businesses, but I think individuals are locked into cash reporting.
What I would do is simply not take the expenses until the 2014 return. This way, everything lines up with what the IRS sees on the 1099.
Doing it the other way and putting everything in the 2013 return will cause a flag sine the income is in 2014 on IRS records.
What I would do is simply not take the expenses until the 2014 return. This way, everything lines up with what the IRS sees on the 1099.
Doing it the other way and putting everything in the 2013 return will cause a flag sine the income is in 2014 on IRS records.
Accrual basis reporting is generally required unless you qualify to elect cash basis. This also applies to single member reporting. Not sure if changing your method would require a 3115 though.
Nevertheless, I agree that reporting in 2014 is a better option. No sense in risking underpayment penalties for 2013.
Nevertheless, I agree that reporting in 2014 is a better option. No sense in risking underpayment penalties for 2013.