Rolando's employer pays year-end bonuses each year on December 31. Rolando, a cash-basis taxpayer, would prefer not to pay tax on his bonus this year. So, he leaves town on December 31, 2019, and doesn't pick up his check until January 2, 2020. When should Rolando report his bonus?
A)2020
B)2019
C)Rolando can choose the year to report the income
D)It does not matter
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

Rolando should report his bonus in 2019 because he earned it in 2019, regardless of when he received it. As a cash-basis taxpayer, income is reported in the year it is received, not when it is earned. By delaying picking up his check, Rolando is not able to defer paying taxes on it.

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