But, if the employee had access to the wages in the first year "without substantial limitation or restriction" (remember constructive receipt), even if the check was dated in the second year, all of the money is considered to have been received in the first year.
This might be the case if the money is deposited using direct deposit in December, for a pay period ending in January.
Small businesses and nonprofit organizations may have more exposure to fraud since they often do not have the resources or systems available for fraud prevention.
If you want to lower your business tax bill this year, pre-pay insurances, mortgages, and loans to increase your expenses.The independent contractor must then include the payment on next year's return, even though no 1099 will be issued for next year.Read more about how to save on business taxes with these end of the tax year tips.The accounting method you use for your business (cash or accrual) makes a difference in timing of payments and income and in the determination of constructive receipt.
In cash accounting, you recognize the income when it is received and the expense when the bill is sent.Employee wages must be recorded in the correct year, and the date of the paycheck is controlling.