Tax Problem

CC's Desperados · Post by **CC's Desperados** » Sun Jan 09, 2005 2:26 pm

As far as income goes, I believe if KP didn't mail out the checks in 2004 in won't count as income in that year(they need to know the tax laws). You can recieve the 1099 in 2005 and that doesn't matter. The same goes for the deductions. If you won $5000 in 2004 for baseball, you could write off your entry for 2004. It would have also been wise to pay for 2005 baseball in 2004. If 2005 entry is paid in 2004, it would be a deductions for 2004. It also would have been income for KP in 2004 though. As for taxes, it is pretty simple. Use schedule C, list your 1099 income, then you can list your expenses. Entry fee, air fare, hotel, any research material, internet access, cable or satelite bills(I'm sure you watched the games for research), newspapers all year, I'm sure your computers is a deduction, rental car or cab fares in Vegas, milage if you drove to the events elsewhere. I bet GG could write off his plasma he just bought if he use it to watch the gaems for research.

ultimatefs · Post by **ultimatefs** » Sun Jan 09, 2005 3:30 pm

I'm pretty sure in you get a 2004 1099, it's 2004 income no matter when you get the check. I doubt the IRS gets caught up in the day you get or cash it.

Dyv · Post by **Dyv** » Sun Jan 09, 2005 4:18 pm

Originally posted by UFS:
I'm pretty sure in you get a 2004 1099, it's 2004 income no matter when you get the check. I doubt the IRS gets caught up in the day you get or cash it. No way I can pay income for something in a year I didn't receive it... we're not (I'm not) a business, so I'm on a cash receipts tax-basis. If I don't get the check postmarked in 2004 then I can't claim it's 2004 income.

Dyv

JerseyPaul · Post by **JerseyPaul** » Sun Jan 09, 2005 4:39 pm

1.1 IRS Procedures: General Procedural Questions

In what tax year is income reported? Does it matter when I receive the check ? Does it matter when I earned the money?

The proper year for reporting income depends on your method of accounting (cash or accrual). The majority of taxpayers filing Form 1040 use the cash method of accounting. Cash method taxpayers report the items of income in the year in which the income was actually or constructively received. For cash method taxpayers, the year that the income is earned is irrelevant.

With respect to "actual receipt," if you receive an item of income that is paid to you by check, your receipt of that check is taxable to you as if it were cash.

With respect to "constructive receipt," constructive receipt occurs when the income is made available to you. For example, you are in constructive receipt of income paid to you by check if the check has been cut and is readily available to you, even though you have not picked it up as planned. Also, you are in constructive receipt of bank interest when it has been credited to your account, even though you have not withdrawn it. Constructive receipt is the issue faced in attempting to determine when payments are to be recognized as income. Internal Revenue Code Section 451(a) states essentially that income is taxable (for cash basis taxpayers) in the year within which it is either actually or constructively received. Treasury Regulation 1.451-2(a) clarified the definition of constructive receipt when it stated that,

"... Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at anytime, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions."Based on my many nights stay at a Holiday Inn Express, the situation we are in is ambiguous enough to be reasonably reported in either year.

Diesel · Post by **Diesel** » Mon Jan 10, 2005 12:23 pm

Greg and Tom, do I need a tax sheet from you guys to get a deduction for my expenses? I didn't win any money.

[ January 10, 2005, 06:23 PM: Message edited by: Diesel ]

JerseyPaul · Post by **JerseyPaul** » Mon Jan 10, 2005 2:48 pm

No deduction if you don't win.

Gordon Gekko · Post by **Gordon Gekko** » Mon Jan 10, 2005 2:57 pm

Originally posted by CC's Desperados:
I bet GG could write off his plasma he just bought if he use it to watch the gaems for research. i'm gonna write off my place in OC. that's where i do my initial projections.

[ January 10, 2005, 08:57 PM: Message edited by: Gordon Gekko ]

King of Queens · Post by **King of Queens** » Mon Jan 10, 2005 3:19 pm

I wonder if Krause's accounting guy realizes how much he cost his company in taxes for 2004. The gross income for the prior fiscal year is going to be quite a bit higher than it should be.

At the very least, dating the checks in 2004 (even if they were mailed in 2005) would have eliminated this problem. I don't see how Krause can use these checks issued in 2005 as expenses for 2004.

Greg, I know you don't handle this end of the business, but trust me on this: someone really screwed the pooch on this one.

Diesel · Post by **Diesel** » Mon Jan 10, 2005 3:27 pm

Originally posted by JerseyPaul:
No deduction if you don't win. Since you were in my Auction league, and won...Why do I get the feeling that you were smiling when you posted this last message?

Gordon Gekko · Post by **Gordon Gekko** » Mon Jan 10, 2005 3:36 pm

Originally posted by King of Queens:
At the very least, dating the checks in 2004 (even if they were mailed in 2005) would have eliminated this problem. wouldn't have mattered for me. i didn't receive the check in 2004. i ain't going to pay for tax year 2004....even if KP issues a 2004 1099-misc