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I did work for a company in 2012, but will not receive money from them until 2013.

I think it would be beneficial for me to claim that income in 2012 because it is miscellaneous income (in additional to my regular fulltime job), and I have about as many expenses for this miscellaneous income as I have actual income.

Am I allowed to do this?

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I assume this is for a US tax return, and if so, please add the united-states tag. If you receive money as a contractor from a company, it goes on Schedule C as self-employment income and expenses incurred in the production of that income get deducted there. You also get to pay the employee's share as well as the employer's share of Social Security and Medicare taxes on that income. It is not miscellaneous income to you that gets reported on the "Other Income" line on Form 1040. Note that there are no deductions allowed against miscellaneous income. – Dilip Sarwate Dec 31 '12 at 14:48
Note to moderators: I did not answer the central question "Am I allowed to do this?" and so this qualifies as a comment. – Dilip Sarwate Dec 31 '12 at 14:49
Thanks - I think the main thing I wanted to know though is, if I did the work in 2012, do I claim the income in 2012, or do I claim it in 2013 when I receive the money? – mheavers Dec 31 '12 at 19:52
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You should talk to your accountant. If its a first year business there might be some accounting tricks available for you that aren't there anymore after the first year. There's also a constructive receipt doctrine for cash-based accounting, and circumstances do matter. You will not get a proper reliable answer here, and you definitely should talk to a licensed professional (EA or CPA) to get a proper tax advice that you can rely on if there are problems later on. – littleadv Dec 31 '12 at 20:24

1 Answer

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If you didn't receive the money in 2012 or have constructive receipt you really can't claim the income. If the company is going to give you a 1099 for the work they aren't going to give you one until next year and if you claim it this year you will have a hard time explaining the income difference.

On the other hand if this isn't miscellaneous income, but rather self employment income and expenses you should be able to claim the expenses in 2012 and if you have a loss that would carry over to 2013.

Note it is possible to use an accrual basis if you are running a business (which would allow you to do this), but it is more complex than the cash accounting individual tax payers use.

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