Backdating cash receipts

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Discuss timing ideas with your tax professional before you commit to them.

The principle of "constructive receipt" applies to payments and income that cross over the end of the year.

The independent contractor must then include the payment on next year's return, even though no 1099 will be issued for next year.

Read more about how to save on business taxes with these end of the tax year tips.

But, if the employee had access to the wages in the first year "without substantial limitation or restriction" (remember constructive receipt), even if the check was dated in the second year, all of the money is considered to have been received in the first year.

This might be the case if the money is deposited using direct deposit in December, for a pay period ending in January.

In accrual accounting, you recognize the income or expense when it is established (when the bill is sent or received).

Read more about the differences between cash and accrual accounting before you attempt to time income and expenses between tax years.

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Typically, cash receipts are the most frequently entered transaction types.Some years have more pay periods, which might also affect the amount of an employee's paycheck between years. Check with your tax professional if you aren't sure how to allocate employee pay across two years.It's certainly appropriate to use a credit card to make those end-of-year payments.In Mind Share, we'll give you simple, practical advice on accounting issues based on Bookminders' two decades of experience.If you are reading this in the fall, or even December it's a good time to think about how you can save money on your business taxes by timing income and expenses. Many businesses have found that they can minimize business taxes year-to-year by considering carefully when to make payments to increase expenses and tax deductions and push receipts to create income at the end of the tax year.The Cash receipts window (in the Advanced Accounting Console, go to Finance This field is displayed only if the associated card authorization account uses immediate authorization, or deferred authorization with the Save CSC Prior to Authorization checkbox selected (see Save CSC Prior to Authorization for more information).

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