Does income for the year include money earned but not paid during the year

[rdrbr21]

If I earned money the last week of 2013 but don't get paid for it until first check of 2014 does it count as income for 2013?

[ScruffyCurmudgeon]

Generally, no - almost all taxpayers are on what is called a "cash basis" meaning you report your earnings and expenses in the year in which the cash as received or spent. So, while you may be owed the money as salary or wages, if you have not received it in 2018, it is not 2018 income.

[Carl]

Income is reported in the tax year it is received. It flat out does not matter in what year you may have earned it.

[Lisad1]

If income is deposited into your bank on Jan. 2, 2020 but is included on your 2019 1099-misc, are you supposed to have the 1099 corrected or move the income from 2020 to 2019 in Quickbooks/taxes?

[ColeenD3]

If someone paid you the income in 2019, it is their deduction in 2019, but that doesn't affect you. If you received it in 2020, then you report it in 2020.

[JohnB5677]

You have to make a decision.

If you report the income based on the tax year on the check, then the 1099 and your income will match, but if you wish, you can hold the reporting of the income to the following year and attach a note to your return. You will have to mail your return, (this cannot be done with electronic filing). 

Having the 1099 MISC in one year and withholding Income Reporting to the following year will probably result in questions.  You may be 100% correct, but is it worth the exposure.

[Renbuild1]

If I receive a check in November 2021 but don’t deposit it until January 2022, do I claim it on taxes for 2021 or 2022 ?

[VolvoGirl]

The year you actually got it and it was paid to you.  So when you got the check.  What kind of income?  If it was paid in Nov 2021 whoever paid you will report it on a 2021 W2 or 1099.  

[Renbuild1]

Does “receive” mean having  a check placed in my hands or having  the amount of the check actually deposited in my account?  In other words, can I defer income to 2022 by depositing a check in January 2022 even though it is dated November 2021 ?

[Renbuild1]

It’s a lump sum payoff of a note we’ve held for ten years.  I sold a house earlier this year and that jumped up my bracket.  I’d like to defer the gain from the note payoff until next year and thought if I didn’t actually have the funds in my account I could say I didn’t actually “receive “ the income.

[VolvoGirl]

Sorry you received the check.  That counts as you getting it.  What you do with the check and when doesn't matter.  

[ScruffyCurmudgeon]

The relevant term is "Constructive Receipt."

Your income needs to be reported in the year that you have the ability to access the receipt of the funds, whether or not you open the check envelope or cash the check, but rather the governing determination is that you had the capacity to receive and use the monies, whether you did or not.

As end of year arrives, there is the problematic matter of a check mailed (not ACH, EFT, electronic deposit) in year 1 but because of postal handling time it is not received until year 2.

[MJul]

Thank you for that clarification.  Can I assume that a physical check cut by my employer and mailed on Dec 31, 2021 will contain funds that are not available until 2022, since I will not have the ability to access these funds until the check is received and deposited after the new year?

[DanielV01]

@MJul  The reason why @ScruffyCurmudgeon describes the situation as "problematic" is as follows:  When the company writes you the check, they have made the funds available to you on their end.  If they are a cash-accounting customer, they would no doubt include this income as part of their 1099 that they issue to you.  While it is true that you can't have access to it and therefore have "constructive receipt"  of the income until you receive the check, the IRS hates inconsistency.  So if the other company is deducting it as a cash-basis accounting, and you are cash basis also, then their default expectation is for you to include the income also.  See the following IRS website for further information:  Constructive receipt of income.

As a possible means to successfully claim this income as not having been constructively received, you could enter such as a negative adjustment to income (such as Line 2 on Schedule C, "Returns and Allowances") this year and then in 2022 include the income as "Other income" (Line 6).  Keep documentation showing when you received the income, in case the IRS questions it.  And don't forget to report it in 2022.

If you are an employee, however, and the income is reported on your W2, you will not be able to adjust it.  And you can be sure your employer won't, either.

[caraimp1]

My employer paid a Quickbooks invoice from me on December 30, but the money won't appear in my bank account until this week - it usually takes about 4 days. Would I count this as income for 2021 or 2022?

Thanks!