[{"data":1,"prerenderedAt":7},["ShallowReactive",2],{"faq-standard-1115":3},{"rec_id":4,"title":5,"text":6},"1115","What is the cash method?","Most individuals and many small businesses use the cash method of accounting. \n\u003Cbr>\u003Cbr>\nUnder the cash method, you record income when you actually receive payment and record expenses when you actually pay them. Under the accrual method, you record income when it is earned (for example, when goods are delivered or an invoice is issued) and record expenses when they are incurred (for example, when you receive a bill or become legally obligated to pay), even if no cash has changed hands.\n\u003Cbr>\u003Cbr>\nFor example, let's say that you invoice a customer $1,000 in December but they pay in January. Under the cash method, you would report the $1,000 in January. Under the accrual method, you would report the $1,000 in December.\n\u003Cbr>\u003Cbr>\nTo use the cash method, include in your gross income all items of income you actually or constructively received during the tax year. If you received property or services, you must include their fair market value in income. \"Constructive receipt of income\" is when an amount is credited to your account or made available to you without restriction.\n\u003Cbr>\u003Cbr>\nYou must report the income in the year the property is received or made available to you without restriction. You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income.\n\u003Cbr>\u003Cbr>\nFor example, if a customer mails a check to you on December 31, 2024, and you receive the check on January 4, 2025, under the cash method you will include the check as income on your 2025 tax return.",1777391533557]