SCorp net profit pass through question

[bitsmythe]

Single member, cash basis, SCorp small business owner, help with a question if you have a moment please

Let's assume a gross income 220k. 90k of that is from a customer prepaying for a year of services back in August. Only 5 months of CoGS were able to be paid out towards those services. This resulted in a net profit of 70k overall pass through. There were no distributions.

Are there any options for amortizing revenue or retaining earnings? I may be thinking about this wrong but it feels like paying taxes on unrecognized profit doesn't seem right. Any ideas? Thanks!

[tagteam · Accepted solution]

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@bitsmythe wrote:

I may be thinking about this wrong but it feels like paying taxes on unrecognized profit......

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It is not "unrecognized profit"; since the corporation is a cash basis taxpayer, income is recognized in the tax year in which it is received.

[bitsmythe]

Thanks!