transaction date

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tony
Posts: 102
Joined: Tue Oct 18, 2016 8:50 pm

transaction date

Post by tony »

I provided a service to an overseas company in Jan 2016. However, the payment was sent online on Dec 28 2016. Then, the payment is just received in 2017.

The question is when should I pay the tax to that payment? 2016 or 2017?
Please note that the company is an overseas company.

thanks
nelsona
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Post by nelsona »

2016.
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ND
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Post by ND »

Just be aware:
The Internal Revenue Service allows small businesses to choose between the cash method and the accrual method for reporting income and expenses on their tax returns. To qualify as a small business, according to the IRS, your average annual gross receipts for the past three years must be between $1 million and $10 million.

The rules for cash basis taxpayers, a taxpayer who reports income and deductions in the year that they are actually paid or received, are essentially the same as for cash basis businesses.

A cash basis taxpayer with your facts would report in 2017, not 2016.
nelsona
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Post by nelsona »

Lots to assume here, ND. First you are assuming that the person is a US taxpayer.
We don't even know that the payment is coming from US or not, or to the US.

In any event, one would want the transaction to occur in the same year, to ensure any foreign tax arising from the transaction to mesh.

Any tax receipt that might be issued on this transaction would indeed be for 2016, so best go with that.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
tony
Posts: 102
Joined: Tue Oct 18, 2016 8:50 pm

Post by tony »

Thanks for the reply.
1. how can I prove if asked by IRS?
2. to clarify, I stay in US only in Dec 2016. So, it means I dont' need to report in my US tax return 2016 right?
3. the payer is also outside US, so in this case no need to report. Correct?
4. The payment is only few hundreds dollar. But, if asked, how can I prove it? email will sufficient?

thanks
nelsona
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Post by nelsona »

Were you an employee?
If so, the employer will issue you a w-2. You would need to report it on a 1040NR if you need to get back any tax that was withheld.

If you are a business, then you keep accurate records.

Your question and follow-ups have been very vague. You don't say what your citizenship, residence, country where work took place, etc.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
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Post by nelsona »

Soryy, since the payer is outside US they will not issue W-2, but they should issue a tax slip of that country.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
tony
Posts: 102
Joined: Tue Oct 18, 2016 8:50 pm

Post by tony »

hi Nelsona,
The problem is I was in country A, and the payer was in country B. It was a programming job. And, now I am in country C, which is USA. So, there is no tax receipt or anything. But, because there was a delay during e-transfer due to holiday season, which I don't anticipate the payment was missed but few days and it finalized in January 2017.

What would you advise? Is the bank account be audited to every single transaction?
Because in 2017, I am fully US tax resident.

thanks
nelsona
Posts: 18699
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

The works and transaction occurred in 2016. Period.

If they cut you a check in December and you held it for 2 months, that would not change that this was 2106 money. This is similar.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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