Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2012, and received a check in full payment from the client on January 12, 2013. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2012.

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Since Poole is a cash basis taxpayer, income is only recognized when cash is received. Since the payment was received in January 2013, the $1,675 is taxable income for 2013, not 2012.

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