Have I Been Doing This Wrong All This Time?

[Country Kids]

I wanted to ask you guys how you all do this as I never really questioned it till this year and wondering if I have done it wrong this entire time.

Daycare parents bill for December-I bill for on Dec. 31, paid no later then Jan. 5

I claim that as income for the previous year but the are really paying me in the new year, so should I be claiming it for the new year?

Same with my own expenses/bills. Alot of my own for Dec. are due in Jan. and once I pay it I put it down for Dec. but should it really be in Jan?

Maybe I have been doing it right since I'm look at it written out but just want to make sure!

[Blackcat31]

I was always under the understanding that you claim income when you recieve it NOT when you provided the services so if you billed on Dec 31 but didn't get money in hand until after Jan 1, 2013, you will need to claim it in 2013

[Country Kids]

I was always under the understanding that you claim income when you recieve it NOT when you provided the services so if you billed on Dec 31 but didn't get money in hand until after Jan 1, 2013, you will need to claim it in 2013

What about my expenses though? I used them in Dec. but paying them in Jan. so would I claim in old year or new year?

I thinking my parents are also claiming all the childcare expenses for the year=Jan-Dec. of the same year, not Jan (of the previous year)-November if that makes sense?

[MarinaVanessa]

Yep, you claim the income based on when you were paid, not the dates that it covered.

I recently had a hold on my subsidy payments because subsidy couldn't get their stuff together and I just recently received payment for a DCG that covered September, October, November and December. Even though the payment covered those months I have to claim it as 2013 income.

[Country Kids]

What about expenses then?

Things you pay in January for the previous Dec?

[MarinaVanessa]

I'm not sure what you mean here? You use them in December but pay for them in January? Do you mean like you charge it onto a credit card?

[Country Kids]

I'm not sure what you mean here? You use them in December but pay for them in January? Do you mean like you charge it onto a credit card?

No, my water/electric/phone/cable/sewer/house/things like that.

[frugalmama4]

I had this same question last year, I asked Tom and he said...

You claim the income when you Receive it...January in your case.

You claim the expense (lights, water etc) when you pay it...January in your case. It all still comes out to 12 months of bills being paid Jan-Dec.

Hope this helps...check out Tom's blog he has a section on this subject I think.

[Country Kids]

I had this same question last year, I asked Tom and he said...

You claim the income when you Receive it...January in your case.

You claim the expense (lights, water etc) when you pay it...January in your case. It all still comes out to 12 months of bills being paid Jan-Dec.

Hope this helps...check out Tom's blog he has a section on this subject I think.

I just asked him under the tax section. Thanks for the info. though. It doesn't make sens to me about the expenses because how can we claim them when its for a different year?

[SilverSabre25]

I make a point of trying to chase down payments by Dec 31

[MyAngels]

As the others have said, assuming you are using a cash basis for accounting (most common) you would claim income when it is received and bills when they are paid, no matter when they are incurred.

Don't ask me why, though - I just know it's true .

[canadiancare]

yes it is the day the money was received. I always tell my parents who might owe in early Jan that I need to deposit the money by Dec 31 if they want it on that year's receipt.

[blessed mom]

I was always under the understanding that you claim income when you recieve it NOT when you provided the services so if you billed on Dec 31 but didn't get money in hand until after Jan 1, 2013, you will need to claim it in 2013

This is my understanding too

[kitykids3]

I've always claimed transactions in the year they happen. The bill I get for electric in January is always from December, but since it is paid in January, it gets claimed for the new year.

[GoodKarma]

Yep, what Frugalmama said.