Small business income question

[manbeing]

I started a single-member LLC last year. I developed mobile apps and I added Google Ads in my app.

I had $30 earnings from Google Ads last year, but since Google Ads has minimum $100 payout threshold, I cannot payout these $30 to my business bank account, thus these money is still in my Google Ads account which shows earnings =$30 and payments =$0.

In this case, do I need to report these $30 as the business income on Schedule C? 

Thanks!

[DaveF1006 · Accepted solution]

No.  if you use the cash basis for accounting, you will not report the income for this year since you have not received the funds.

[Edited 03/11/22|7:15 am PST]

@manbeing 

[manbeing]

@DaveF1006 

I have been confused as I got a different answer here. Could you please confirm if I need to report it or not?

"As you can't withdraw the $30, this amount isn't constructively received by you and you don't have to report it on Schedule C of your tax return.

The full text of the IRS regulation defining constructive receipt states as follows:[2]

Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions."

[manbeing]

@DaveF1006  so if Accrual Accounting Method is used, the $30 earnings must be reported even though the payment wasn't made in 2023?

[DaveF1006]

Yes, if the accrual method was used in your accounting method, then the income would need to be reported this year.

@manbeing