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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I'm a cash basis consruction company and I received deposits

Customer Question

Hi, I'm a cash basis consruction company and I received deposits on Dec 27th Do I include them as income
JA: Thanks. Can you give me any more details about your issue?
Customer: construction company - I took a large deposit on Dec 27th, for work to be done in February Do I count it as income on cash basis /
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Submitted: 9 months ago.
Category: Tax
Expert:  emc011075 replied 9 months ago.
Hi. My name is ***** ***** I will be happy to help you. As cash basis taxpayer you report income when you receive it (cash/check/direct deposit) and claim expense when you pay for it. Your income is what you constructively received between January 1 and December 31.
Customer: replied 9 months ago.
Hi Eva, I'm a S-corp, my income was about $100,000 for the year and i have received a $250,000 deposit - my profit on it will about $40,000 - I'm using a subcontractor - So I have to pay tax on $350,000 for 2015?
Expert:  emc011075 replied 9 months ago.
If you are cash basis than you have to include it in your 2015 return. The profit will flow through K1 to your individual tax return. Let me opt out and see if an accountant can figure out if there's a way to limit it through your bookkeeping.
Expert:  Megan C replied 9 months ago.
Thank you for your question - cash basis taxpayers pay tax on income when received, and this does create a problem and it is somewhat annoying. This is problematic and has been analyzed by tax professionals all over. However, as the taxpayer is clearly cash basis - it's includable in the current year, and then the expense will be deducted in the future year. There will be a higher tax in 2015 and then a lower tax in 2016. Here's a good article on this: http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1753&context=dlj I wish I had better news for you - please let me know if you need anything additional. If not, please rate positive.

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