Got kind of a complicated question here. Here we go.
I am an expat now living outside of the US. During 2022, for the first half of the year, the income I earned was through my USA Sole Proprietorship (for which I had to pay US taxes on), the second half of the year it was earned through my Polish Sole Proprietorship (for which I had to pay Polish taxes on).
Polish Taxes are paid on the Accrual Method of accounting – which is required by law in Poland to do it that way, they are paid based on the month which they were earned – but not yet received into my bank account.
For 2022 I did not yet receive November and December’s payments into my bank account until 2023 (as the payments I receive are monthly and one month behind, give or take a few days), yet Polish taxes were paid in 2022 on the income generated in November and December.
The accounting on the 1099-K that is shown is the Cash Method of accounting, and I have been using the Cash Method of accounting in all years prior to this to account for my taxes, how would I go about merging these two different methods of accounting? Since according to Poland, I paid taxes on income that is not recorded on my 1099-K for 2022, but will be on my 1099-K for 2023?
I imagine, that if I just have the USA Schedule C using the Cash Method, and the Polish Schedule C, using the Accrual Method, that there will be revenue that is unaccounted for. I need to report to the IRS how much taxes I paid to Poland for 2022. Should I use the Cash Method of accounting for both Schedule Cs, neither, or different for each?
Thank you for any advice you can give,
Aaron
