Is it 2021 or 2022 income?

[JamesInGA]

I did some work in December 2021 for a company through an online freelance marketplace. Companies post jobs they need to be done and we submit proposals and someone gets contracted.  We record our time and get paid from the marketplace.  However, this particular marketplace doesn't send you a payment directly but to a 3rd party money transfer company called Payoneer (it's required, not my choice).  My question revolves around the occurrence that one of my payments for last year was sent from the marketplace to Payoneer on Dec 31st. The earliest I could then transfer it to my bank was Jan 3rd. My question is, is it 2021 income because Payoneer received the money on 12/31 or is it 2022 income because I couldn't receive the money to my bank until 1/3?  I just started the contract at the end of the year so I didn't make enough on it by the end of the year to receive a 1099 so I can't just wait for that to see.  Thank you!

[Carl]

Assuming you use the cash basis accounting method and not the accrual bassis accounting method, money is not yours until at an absolute minimum, you have control of it. This is referred to as "constructive receipt". Since you had no control of the money on or before Dec 31st, it's 2022 income.

[JamesInGA]

Thank you Carl!  What is the definition of control?  Once it hit Payoneer on 12/31, I did have the ability on 12/31 to schedule a transfer to my bank, it just couldn't take place until 1/3.  Would that qualify as "control"?

[Carl]

Would that qualify as "control"?

I would think so. To me, that would be constructive receipt. So I'd include it in 2021 income. You should document this, as it may cause confusion on your 2022 taxes depending on your book keeping methods. You may be confused by a difference that is equal to the amount you had control of on Dec 31, 2021.

[tagteam · Accepted solution]

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@JamesInGA wrote:

Once it hit Payoneer on 12/31, I did have the ability on 12/31 to schedule a transfer to my bank, it just couldn't take place until 1/3.  Would that qualify as "control"?

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If Payoneer is your agent (you authorized Payoneer to receive income for you), then you are considered to have received the income when your agent receives it (i.e., 2021).