When does a sale become income? When Ebay receives payment or when seller receives payment from Ebay

[fashionandform2]

When does a sale become income? When Ebay receives payment  from buyer or when seller receives payment from Ebay? I have sales this week ( last week of the month) but i don't receive the money from Ebay into my bank account until next week ( after the 1st of Jan- next year).  It makes a difference for income tax reporting.  I know i can take some of the money now but i'd rather wait until next week(year) if it makes a difference to lessen my tax burden.

[bill.purvis2012]

I do cash accounting. I count it as income when I receive it in my bank account. 

[shashedevind0]

It certainly does from the accounting base. That's why the accounts are prepared on Accrual Basis. So when you have a pending Income it should be categorized as an Income Receivable (Sales Income Receivable). It does not shows on the Income Statement/Profit and Loss Statement/Comprehensive Income Statement. Hence won't affect to the taxes. After it has been identified as an Actual Income, it will then shown under the Income Statement/Profit and Loss Statement/Comprehensive Income Statement. So it affects the taxes.

Best Regards

Shashen

[nobody*s_perfect · Accepted solution]

eBay says: "As Form 1099-K is an IRS information return, it includes the gross amount of all reportable payment transactions within a calendar year, based on when funds settle to eBay, not necessarily when funds are received by sellers."

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

[monica-sells]

ask 3 accountants and you will get 3 different answers.......

as far as 1099-K is concerned, @nobody*s_perfect is correct according to my tax person....

as far as 'booking as income' one says it is when the money is physically in your account....

another says when it is processed on your behalf but not yet in your account, but "in escrow" with the 3rd party who is 'holding' it and is 'technically' yours.....

and yet another says you should credit your books the moment the sale takes place as an accrual method (whatever that means)...the sale becomes a receivable, but is not yet income...

OMG what a selection

[powell-memorabilia]

---

@monica-sells wrote:

ask 3 accountants and you will get 3 different answers.......

as far as 1099-K is concerned, @nobody*s_perfect is correct according to my tax person....

as far as 'booking as income' one says it is when the money is physically in your account....

another says when it is processed on your behalf but not yet in your account, but "in escrow" with the 3rd party who is 'holding' it and is 'technically' yours.....

and yet another says you should credit your books the moment the sale takes place as an accrual method (whatever that means)...the sale becomes a receivable, but is not yet income...

OMG what a selection

---

100% right 🙂

There is no right answer - from personal taxes to corporate taxes.  

[714ricki]

From my perspective and per my accoumtant, if an item is sells on December 30-31 then the sale amount is for Tax Year 2022. The transaction will appear in my sales report for 2022. However, the money received might not be reflected in your 1099-K for 2022 and will roll over into the 2023 1099-K. My accountant tells me not to worry about the small delta, it will be reported in 2023.

If its just a sales report on total sale, then its for 2022

If its about income received, everything will depend on when the money is processed into your account. It could be 2022 or 2023. The small delta is negligible. 

Unless you expect a huge sale that will trigger you into the tax threshold, then I wouldn't stress too much about these end of year transactions. Of course, you can still make some buinsess expenses today to offset any potential tax liability. 

Good luck & keep on selling!!!

Happy New Year!

[slippinjimmy]

---

@bill.purvis2012 wrote:

I do cash accounting. I count it as income when I receive it in my bank account. 

---

And I'm on a modified accrual method so I consider it REVENUE (not income) on the date of the payment. The IRS doesn't really care which method you use as long as you are consistent from year to year.

I also have a fiscal year end of Feb. 28 so the numbers shown on a 1099K are meaningless for my accounting.