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If you use the cash method of accounting (and there are very specific rules about accounting method and changing that method), you have constructively received the rent and must report it in 2016.
I'm not really following your accounting method anyway. Don't your tenants pay a month in advance? Do you charge daily rent? Weekly rent?
Are you considering changing the payment terms of your lease without notice?
When they pay on the 27th it is for those last few days of the month plus the first 27 days of the next month. Most landlords have tenants pay on the 1st because it's easier to remember. I just never changed it.
I was thinking about asking them to delay the December 27th payment to January 1st. How much notice do you need to give? 30 days?
It sounds like the only way around this is to have my tenant move their rent due date up to the first of every month.
There's only 30 days in November. So to calculate these 3 extra days I guess it would be Monthly Rate divided by 30 days times 3 days?
You select either cash basis accounting or accrual basis accounting for your business, not for just one check. Choosing accrual basis may require other accounting changes also.
What if you receive a check in 2016 that is post dated January 1, 2017?
A check becomes legal once signed regardless of the date the person writes on it. If in 2016 you receive a post dated check for 2017, it's legally paid in 2016 despite the date. Now, you can decide to hold it until the next year, but the tenant can legally claim or you can deposit it for payment in 2016.
A check becomes legal once signed regardless of the date the person writes on it. If in 2016 you receive a post dated check for 2017, it's legally paid in 2016 despite the date. Now, you can decide to hold it until the next year, but the tenant can legally claim or you can deposit it for payment in 2016.
Thanks for the info. Here's another head scratcher.... Rent is due on the 25th. I could ask my tenants to agree to simply delay paying me ALL of the rent until the 1st of January. But the IRS might not like that. Maybe I should ask for 2 checks. One for rent for Dec 25 through Dec 31 and one for Jan 1 through Jan 24, making sure that they don't pay me both checks or at least the last check before Jan 1.
My honest opinion is this is an awful lot of fanagaling over $300. Your tenants may interpret this as something suspicious or shady on your part and (rightfully or wrongfully) that can cause so much more unseen suspicion to you compared tot he value of the tax savings.
Thanks for the info. Here's another head scratcher.... Rent is due on the 25th. I could ask my tenants to agree to simply delay paying me ALL of the rent until the 1st of January. But the IRS might not like that. Maybe I should ask for 2 checks. One for rent for Dec 25 through Dec 31 and one for Jan 1 through Jan 24, making sure that they don't pay me both checks or at least the last check before Jan 1.
I mean, in reality, the IRS will never find out, and for the sum of money you're talking about, they wouldn't care. Moreover, unless you decide to quit all money making next year, you're not avoiding taxes; you're simply delaying them to next year. At the most, you're what, delaying paying $100 in taxes?
My understanding that, technically, receiving the check means that it is income, not when you cash it.
Then again, not like the IRS would know... or really care considering, unless you somehow can switch tax brackets to a much lower bracket the next year, it doesn't affect how much you pay in taxes to a significant extent
Technically yes but nobody can really determine when you actually received it so most of the time the funds are considered earned when you deposit it.
I get my rental payments for the month due either at the end of the previous month or the first or by the 4th of that month rent is paid for
There is no way I have the time to screw around playing tax games over 1-300 bucks. I just don't. I deposit and claim my money for the calendar year I deposit it. My taxes are complicated enough as it is.
I don't really understand his accounting but not my problem.
I mean, in reality, the IRS will never find out, and for the sum of money you're talking about, they wouldn't care. Moreover, unless you decide to quit all money making next year, you're not avoiding taxes; you're simply delaying them to next year. At the most, you're what, delaying paying $100 in taxes?
Like J-walking or not paying taxes for stuff that I bought on the Internet out of state back in the day.... never enforced.
Technically yes but nobody can really determine when you actually received it so most of the time the funds are considered earned when you deposit it.
I get my rental payments for the month due either at the end of the previous month or the first or by the 4th of that month rent is paid for
There is no way I have the time to screw around playing tax games over 1-300 bucks. I just don't. I deposit and claim my money for the calendar year I deposit it. My taxes are complicated enough as it is.
I don't really understand his accounting but not my problem.
Yeah, this is all really ridiculous. I mean, if you were revenuing $100M+, maybe then you could get into the nitty gritty about exactly when you want money to be considered earned, but this $100 game seems like such an academic exercise.
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