When Do I Report Income?

It’s the last day of December and a parent hands you a check for $180 for child care you will deliver in January. You deposit the check on January 2nd.

What tax year do you report this income?

You must report income in the year you receive it, not the year you earned it.

So, the $180 is income for December.

If the parent paid you on January 2nd for the last week of December, it’s income for the January tax year.

It doesn’t matter what date the parent writes on their check. So, if the parent’s check says “January 2, 20__” and you receive the check in December, it’s December’s income.

If you receive a check for $180 on December 29th and wait to deposit the check in the bank until January, it’s still December’s income because that’s when you received it.

When you receive your Food Program check in January, it’s January’s income, even though the reimbursement is for food you served in the previous year.

It doesn’t matter what year you earned the money, it’s the year that you received the money that matters.

When to claim expenses

Expenses are claimed in the year you pay for them.

So, if you bought something on December 31st, you can deduct it that year.

What happens when you buy something in December with a credit or debit card, but don’t pay for it until the next year?

When you buy something with a credit or debit card, you are obligating yourself to pay the expense when you sign your name on the bill. Therefore, this would be a December expense.

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.amazon.com/HISCOW-Zippered-Checkbook-Holder-Divider/dp/B0773GKL44