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Level 2
posted May 29, 2018 5:57:10 PM

Accrual vs Cash Accounting

In early Jan 2018 I got invoice of eBay seller fees for the period of Dec 1 - Dec 31 2017. So I paid this invoice in 2018 rather than in 2017. Should I include this as business cost for tax year of 2017 or 2018?
Seems Accrual Accounting will include it in 2017 while cash accounting in 2018. Right?
If I run out of my business and never paid or intend to pay that invoice, should it still be included for tax purpose if I use Accrual Accounting?

 

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1 Replies
Level 15
May 30, 2018 5:53:59 PM

I run my own business on the cash basis method. Accrual just doesn't make sense to me, because I don't want to pay taxes on money until I physically have it in my hands and under my direct control.  So with the cash method, expenses are claimed in the tax year they are paid. Period. Income is reported in the tax year it is received. Period.