Level 5
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Business & farm

New business owner here.

I started a LLC in CA in 2018 which costs $800 per year. 

I did not file my 2018 return yet (extension)

I performed work in 2018 for a client for $750. Did not receive the money until 2019. 

 

I have not decided if I am going to use cash or accrual method accounting for the business.

 

I had to wind down the business in 2018. I did not pay the $800 fee to CA to renew the business for 2019. 

 

I have 2 options as I see it, but dont know which is right? 

 

Option A: 

File 2018 return Schedule C for business as ACCRUAL method accounting, take into account the revenue 750.

In 2019, I will receive a 1099 for the money. Recognize the 1099 on the 2019 return and then note that the money was taxed in 2018 (and effectively zero out the income for 2019)??

 

Option B:

File 2018 return Schedule C for business as CASH method accounting, 0 revenue for 2018. 

In 2019, I will receive a 1099 for the money. Recognize the 1099 on the 2019 return.

 

Are there pro’s and con’s to either of these? option B seems like a cleaner method to follow, and it does put me at a slight disadvantage economically as I will be in a higher tax bracket in 2019."