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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15600
Experience:  15years with H & R Block. Divisional leader, Instructor
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I have a small business and I do work companies that can

Customer Question

I have a small business and I do work for big companies that can take up to 90 days to pay me. For 2015 I made deposits of 950,00 But my 1099 equals 850000. Some of my deposit money came from the months of the last 3 months of work done in 2014. Do I pay taxes on 950000 are 850000 the 1099 amount
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


How you report the income depends on the accounting method you have chosen for your business.

Cash Accounting recognizes revenues when cash is received, and expenses when they are paid. This method does not recognize accounts receivable or accounts payable. Many small businesses opt to use the cash basis of accounting because it is simple to maintain. You would report the actual amount you received in 2015.

Under Accrual Accounting, revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid. This method is more commonly used than the cash method.

You would have reported in 2014 amount earned in 2014 even if not paid til 2015.