Rolando's employer pays year-end bonuses each year on December 31. Rolando, a cash basis taxpayer, would prefer to not pay tax on his bonus this year. So, he leaves town on December 31, 2017 and doesn't pick up his check until January 2, 2018. When should Rolando report his bonus?

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Rolando reports income in the year he received it. His year-end bonus was earned and became due to him in 2017, even if he didn't pick up the check until 2018. Therefore, he should report the bonus as income for 2017.

Rolando's Employer Pays Year-End Bonuses Each Year on December 31