Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2020, and received a check in full payment from the client on January 12, 2021. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2020.

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Poole Services reports income when it is received, not when it is billed. Since the payment was received in 2021, the $1,675 is taxable income for 2021, not 2020.

Poole Services, a Calendar Year Taxpayer, Billed a Client for $1,675