Is income counted when a cheque is written or cashed?

Donald Trump

Suppose you do a bit of casual work as a one-off and receive a cheque in December but don't cash it until January. Which year do you report it and pay tax on it?

silent_spark

Neither, it typically relates to the period in which you earned it.

Tow

Under the rules which came in last year, it is the date on the cheque,

lashes34

silent_spark wrote: »

Neither, it typically relates to the period in which you earned it.

It doesnt - its the date on the cheque.

Donald Trump

Grand. Thanks for that. Was just after sending off an invoice there but wasn't sure if it would be back in time for lodging before the end of the year what with the Christmas etc.

I presume then I need to keep a copy of the cheque to prove the date it was written on? (assuming it isn't lodged til Jan)

Mrs OBumble

Tow wrote: »

Under the rules which came in last year, it is the date on the cheque,

That's if you're an employee.

If there's an invoice involved, different rules apply.

Donald Trump

Mrs OBumble wrote: »

That's if you're an employee.

If there's an invoice involved, different rules apply.

Oh, so does it go to the date of the invoice then?

silent_spark

lashes34 wrote: »

It doesnt - its the date on the cheque.

Apologies, I was of the understanding the OP meant freelance, non-PAYE income. PAYE income is based on receipt of payment. Invoice-based work is based on the period it was earned.

BrianBoru00

Piggybacking on the thread -surely it would have to be the date it was cashed?

Like if I earn money for work completed in December 2018, and send in an invoice in February. Then have to chase it up and chase it up, October comes and I have to file my 2018 income which I do - I'm not going to include money that I haven't yet got. . .
And it may never be paid, but suppose I eventually get a cheque for the work in January 2020 - I have already completed my returns for 2018 when it was earned. I would assume that I just include it on the return I complete in October 2021?

silent_spark

BrianBoru00 wrote: »

Piggybacking on the thread -surely it would have to be the date it was cashed?

Like if I earn money for work completed in December 2018, and send in an invoice in February. Then have to chase it up and chase it up, October comes and I have to file my 2018 income which I do - I'm not going to include money that I haven't yet got. . .
And it may never be paid, but suppose I eventually get a cheque for the work in January 2020 - I have already completed my returns for 2018 when it was earned. I would assume that I just include it on the return I complete in October 2021?

You pay and file for income tax on your taxable profit for each period, not your cash flow. There's a 'money received' form of accounting, but I think that's specific to VAT.

BrianBoru00

silent_spark wrote: »

You pay and file for income tax on your taxable profit for each period, not your cash flow. There's a 'money received' form of accounting, but I think that's specific to VAT.

So therefore you pay tax on the period you cash the cheque?

Donald Trump

silent_spark wrote: »

Apologies, I was of the understanding the OP meant freelance, non-PAYE income. PAYE income is based on receipt of payment. Invoice-based work is based on the period it was earned.

You understood correctly.

It's a one-off. Not something that is going to reoccur and not conducted as part of a business or anything

Calahonda52

silent_spark wrote: »

You pay and file for income tax on your taxable profit for each period, not your cash flow. There's a 'money received' form of accounting, but I think that's specific to VAT.

Two types of accounting: cash (receipts) accounting or accrual accounting.
Its the type of accounting method shown is what drives the VAT process, not the reverse
https://www.revenue.ie/en/starting-a-business/paying-your-tax/moneys-received-basis-of-accounting.aspx

silent_spark

Calahonda52 wrote: »

Two types of accounting: cash (receipts) accounting or accrual accounting.
Its the type of accounting method shown is what drives the VAT process, not the reverse
https://www.revenue.ie/en/starting-a-business/paying-your-tax/moneys-received-basis-of-accounting.aspx

Can that be applied to income tax as well? I'm only familiar with the accruals basis in practice.

Calahonda52

silent_spark wrote: »

Can that be applied to income tax as well? I'm only familiar with the accruals basis in practice.

yes, with the bank account being the key document. Now if you try tell the revenue its on a cash basis with no bank....they will enviserate you as you have failed to keep proper books.

Donald Trump

Ok, another quick question.

When would the tax be due on that income if it was cashed in before the year end? Would I need to file a late tax return or something? Or just wait until next Oct to pay it up?

davindub

Calahonda52 wrote: »

yes, with the bank account being the key document. Now if you try tell the revenue its on a cash basis with no bank....they will enviserate you as you have failed to keep proper books.

I don't think that's true for income tax in the Republic of Ireland?

Calahonda52

davindub wrote: »

I don't think that's true for income tax in the Republic of Ireland?

What about some one who is self employed: eg a plumber

Mrs OBumble

Donald Trump wrote: »

You understood correctly.

It's a one-off. Not something that is going to reoccur and not conducted as part of a business or anything

Ahh, effectively it is a very small-scale sole-trading business.

Yoiu're likely overthinking things. If it's less than 5k, just fill in a Form 12 for the year you actually receive the cash, and declare it then.

Donald Trump

Mrs OBumble wrote: »

Ahh, effectively it is a very small-scale sole-trading business.

Yoiu're likely overthinking things. If it's less than 5k, just fill in a Form 12 for the year you actually receive the cash, and declare it then.

It'd be more than 5k. Getting paid from outside the EU too. But it's still a one off. And I had to fill out forms with my Irish tax number on it to prevent a withholding tax being applied on the other side.....so I assume the Revenue will get details of that at some stage too! So I'm not trying to scam anything. Had just assumed someone else might give me some pointers on here before I'd go bothering Revenue.

My understanding is that I would have been supposed to file something preliminary before 31st Oct last. But I hadn't received any money at that stage (still haven't). It is being processed at the minute.

davindub

Calahonda52 wrote: »

What about some one who is self employed: eg a plumber

It's still on the accruals basis. There was talk about it a few years ago but I don't think it went anywhere.

Happy to be corrected...

Calahonda52

davindub wrote: »

It's still on the accruals basis. There was talk about it a few years ago but I don't think it went anywhere.

Happy to be corrected...

So am I

Mrs OBumble

If it's more than 5k, you need to register as self-employed even though it's a one off. Consult a small business accountant re what expenses you can claim against it.

Donald Trump

Mrs OBumble wrote: »

If it's more than 5k, you need to register as self-employed even though it's a one off. Consult a small business accountant re what expenses you can claim against it.

Balls. Well am I late for doing it now for this year?
Should I have already paid the "tax" even though I haven't received the money yet?

There might have been things I could have claimed against it but I wouldn't really have bought anything (or kept receipts)

Mrs OBumble

With numbers that size, you need professional advice not randoms on the interwebz.

relax carry on

Donald Trump wrote: »

Balls. Well am I late for doing it now for this year?
Should I have already paid the "tax" even though I haven't received the money yet?

There might have been things I could have claimed against it but I wouldn't really have bought anything (or kept receipts)

This is your first year of trading so no preliminary tax due as 100% of your previous years IT is zero.

https://www.revenue.ie/en/self-assessment-and-self-employment/guide-to-self-assessment/what-is-preliminary-tax.aspx

Register for Income tax and file a form 11 next year declaring all your sources of income. Do not claim expenses you cannot back up. You can file your form 11 next year anytime up to 31/10/20

Donald Trump

A quick addition to the question (thanks to all who gave answers).

I also did a little bit of casual work here and there over the last few months. I don't submit invoices for this but fill out claim forms and then the payment is processed and I think tax etc is deducted via their system. So I presume that that is PAYE and not "contracting". I don't have a contract or anything.

Only issue is that when I went to submit the forms last week they told me it wouldn't be processed in time for 2019. Is there any way that I can have this retrospectively added to my 2019 income for tax calculation? Or should it necessarily be there anyway instead of 2020. I'm not an employee and don't have any kind of contract or anything.
Would you think that that is where it is supposed to be? (obviously I will either ask an accountant or Revenue directly at some stage but if people here *know* then it would help me know what to expect)

Rayne Wooney

Donald Trump wrote: »

A quick addition to the question (thanks to all who gave answers).

I also did a little bit of casual work here and there over the last few months. I don't submit invoices for this but fill out claim forms and then the payment is processed and I think tax etc is deducted via their system. So I presume that that is PAYE and not "contracting". I don't have a contract or anything.

Only issue is that when I went to submit the forms last week they told me it wouldn't be processed in time for 2019. Is there any way that I can have this retrospectively added to my 2019 income for tax calculation? Or should it necessarily be there anyway instead of 2020. I'm not an employee and don't have any kind of contract or anything.
Would you think that that is where it is supposed to be? (obviously I will either ask an accountant or Revenue directly at some stage but if people here *know* then it would help me know what to expect)

If they are deducting tax you are an employee.

And it will be included as 2019 income.

davindub

Donald Trump wrote: »

A quick addition to the question (thanks to all who gave answers).

I also did a little bit of casual work here and there over the last few months. I don't submit invoices for this but fill out claim forms and then the payment is processed and I think tax etc is deducted via their system. So I presume that that is PAYE and not "contracting". I don't have a contract or anything.

Only issue is that when I went to submit the forms last week they told me it wouldn't be processed in time for 2019. Is there any way that I can have this retrospectively added to my 2019 income for tax calculation? Or should it necessarily be there anyway instead of 2020. I'm not an employee and don't have any kind of contract or anything.
Would you think that that is where it is supposed to be? (obviously I will either ask an accountant or Revenue directly at some stage but if people here *know* then it would help me know what to expect)

Could be RCT or PSWT, I don't think you clarified what the work was, but if construction or for a government department, one of the above may apply.

Donald Trump

Rayne Wooney wrote: »

If they are deducting tax you are an employee.

And it will be included as 2019 income.

But it won't be paid until 2020.

I thought that if I submitted it in early Dec I'd receive it at the end of the month. But I think they have an earlier deadline for this month due to the Christmas etc.

Donald Trump

davindub wrote: »

Could be RCT or PSWT, I don't think you clarified what the work was, but if construction or for a government department, one of the above may apply.

Was for a third-level institution.

Rayne Wooney

Donald Trump wrote: »

But it won't be paid until 2020.

I thought that if I submitted it in early Dec I'd receive it at the end of the month. But I think they have an earlier deadline for this month due to the Christmas etc.

It depends if you are indeed an employee, and when the institute are declaring the transaction to revenue.

If they run it though payroll for December and pay the taxes over to revenue it’ll be 2019 income for you.

Donald Trump

Rayne Wooney wrote: »

It depends if you are indeed an employee, and when the institute are declaring the transaction to revenue.

If they run it though payroll for December and pay the taxes over to revenue it’ll be 2019 income for you.

That's the easy scenario. But it won't be processed in Dec unfortunately. I was already told that. So I'm guessing it's 2020 then.

I don't know what constitutes "an employee" tbh. I don't have a contract or anything like that.

Mrs OBumble

Rayne Wooney wrote: »

If they are deducting tax you are an employee.

And it will be included as 2019 income.

This is no longer correct.

If they are deducting tax, then you are a PAYE employee.

Under PMOD, income is counted in the year it is paid out.

You cannot influence this, except by asking the employer to pay you in 2019. And for institutional employers the answer may be "no can do".

davindub

Donald Trump wrote: »

Was for a third-level institution.

Pswt is most likely, ask the institution, they should be giving you details of deductions made.

Rayne Wooney

Mrs OBumble wrote: »

This is no longer correct.

If they are deducting tax, then you are a PAYE employee.

Under PMOD, income is counted in the year it is paid out.

You cannot influence this, except by asking the employer to pay you in 2019. And for institutional employers the answer may be "no can do".

It depends when the employer is making the declaration to revenue, which is what the OP needs to find out. If they make it this month then the income will be shown on the employee’s end of year statement for 2019, even if they are paid next year.