January Rent in December?

[Shea Spinelli]

Happy New Year everyone - hope 2017 was great!

We receive payments online via Cozy and I am entering our payments received into Quickbooks to finish the year. We had a few tenants pay online for January of 2018 on December 27, 2017. We won't receive the payment into our account until January 3, 2018.

Do I enter the collected amount in Quickbooks for December or let it roll into January? Do I have a choice? 

Any feedback is appreciated.

Thank you in advance,

Shea

[Tommy F.]

@Shea Spinelli For most individual taxpayers, the cash receipts and disbursements method is the appropriate accounting method to follow. The cash receipts method dictates that cash or equivalents are taxable income in the year of actual or constructive receipt by the taxpayer or taxpayer's “agent”, regardless whether the income was earned in that year. The constructive receipts doctrine says the income is taxed as though it had been received so long as the amount is readily available to the taxpayer and the actual receipt is not subject to substantial limitations or restrictions. You said the rent was paid to Cozy in December and won’t be available to you until January. Cozy is your “agent” so you meet that receipt test. Are there substantial limitations or restrictions to accessing the money? If no, then you meet that receipt test and it’s likely you should report the income in 2017.  However, if Cozy has holding time requirement for receipts before they make funds immediately available to you that may be considered a "restriction" to disqualify it as a 2017 receipt.  Just my two cents. Good luck.