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Silly Accounting Question

by Hyaku_Man
7 replies
This is my first time filing my own tax return for my online income. So forgive my extremely basic question.

Do I pay taxes on money earned in 2009, or money received in 2009? Let's say I earned $5000 from Adsense in December '09, but I received that money at the end of January 2010. Do I pay taxes on that this year? Or is that for next year's taxes because I recieved the money in 2010?
#accounting #question #silly
  • Profile picture of the author Alexander CPA
    Originally Posted by Hyaku_Man View Post

    This is my first time filing my own tax return for my online income. So forgive my extremely basic question.

    Do I pay taxes on money earned in 2009, or money received in 2009? Let's say I earned $5000 from Adsense in December '09, but I received that money at the end of January 2010. Do I pay taxes on that this year? Or is that for next year's taxes because I recieved the money in 2010?
    As your declaring your income, either way it shouldn't really matter, I'd write down when I got the money, so Jan2010, not Dec2009, but either way I can't see how/why it would make any difference.
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  • Profile picture of the author llamafier
    I think the money you have received so far would make the most sense. What if something happened with your AdSense account and you didn't ever get that money.
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  • Profile picture of the author SuzanneH
    It's not a silly question, but it's one you shouldn't be asking on a forum. You need to either talk to an accountant who knows the tax laws for where you live or you need to visit your government's web site for info. (If it were me, I'd talk to an accountant.)

    Suzanne
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  • Profile picture of the author Nicola Lane
    Ring your local tax office and ask. they would much prefer to spend 5 minutes on the phone with someone genuine, then spend months writing letters and auditing someone. Especially when the amount in question is low.
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  • Profile picture of the author theemperor
    Originally Posted by Hyaku_Man View Post

    This is my first time filing my own tax return for my online income. So forgive my extremely basic question.

    Do I pay taxes on money earned in 2009, or money received in 2009? Let's say I earned $5000 from Adsense in December '09, but I received that money at the end of January 2010. Do I pay taxes on that this year? Or is that for next year's taxes because I recieved the money in 2010?
    I know in the UK you can choose whether you do cash accounting (as the money is received) or accrual accounting (as the money is earned). However as stated above, talk to the professionals. You can often get a free consultation for your first appointment with the accountant.
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  • Profile picture of the author Alexander CPA
    Just had a proper think about this, you'd declare it as when you received the income, for example, lets say some company said they'd pay me $10,000 in dec09, but they'd pay me on mar10 - I'd declare that on mar10, because if I declared it dec09, then they never paid up, I'd be paying tax for $10k I never infact earnt.
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    • Profile picture of the author theemperor
      Originally Posted by Alex Brooks View Post

      Just had a proper think about this, you'd declare it as when you received the income, for example, lets say some company said they'd pay me $10,000 in dec09, but they'd pay me on mar10 - I'd declare that on mar10, because if I declared it dec09, then they never paid up, I'd be paying tax for $10k I never infact earnt.
      Not right...

      The following year you will earn $10k less, because you would write of $10k due to a bad debtor. so probably you could offset that against tax the next year. However depending on how much you earn in the 2009 and 2010 respectively and a load of other stuff it may make some difference.

      See an accountant
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