We finally got a New Year's gig offer worth accepting (previous years, we have turned them down due to price and/or location).

This may be the first time for me, in terms of a Big Money gig (vs. free or Small Money gig) at the turn of the new year.

Does anyone know whether these are typically thought of as income for the outgoing year or the incoming year?

I always put income in the year when the money is deposited - which is the following year for NYE. I hope that's the right answer. I've only been audited once and this didn't come up.

Bill, that's a useful answer.

It probably also doesn't hurt to ask the client which year they are declaring the expense for. Could be less messy with the IRS.

Do you have your own year end?
Just asking, because I'm self employed, my year end is at the end of February.
In any case, when the client gives you the cash, which will most likely be 12:01 at the earliest?

Many times the client pays us in advance, but it won't get deposited until later, as Bill comments.

I have a day job, so this all goes on Schedule C and related documents. Therefore 31 December is end of year for me.

I've never been paid before midnight on NYE....

But technically I will declare it as this year's income.

DEFINITELY NEXT YEAR'S INCOME. YOU WILL NOT GET PAID TIL '10 - and that's better for you!

The real answer is that it depends on if the client is reporting it or not. If they report it to the government on your 2009 1099-MISC, then you better report it on your 2009 taxes. If they do not report it, then you can probably do it either way and it won't matter.

A couple yrs ago, we played a Casino on NYE and played through the weekend (as memory serves, it was a Thurs, Fri, Sat, or Wed, Fri, Sat - I don't recall. They cut one check for the whole 3 days, and since they cut it in the previous year, we actually ended up claiming the first weekend in January on the previous year's taxes, because that's where it showed up on the 1099-MISC from the Casino.

Actually it depends on whether you are setup using cash-based accounting or accrual-based acccounting.

In Cash-based accounting, you declare the income when you get paid.

In accrual-based accounting, you declare the income when you earn it.

It doesn't matter when the venue sends to a 1099. The IRS is always 3 years behind when they investigate undeclared income. As long as you ultimately report it, and have a valid accounting reason behind when you report it, they won't care. However if you DO get 1099, you'd better make sure you report it as it's one of the easiest things for the IRS to catch.

disclaimer:
(I once worked for the IRS).

That's interesting. I always thought that if someone sent me a 1099-MISC for a particular year and I didn't claim it in that year, I was asking for trouble.

Quick question - since you don't actually list your 1099's on your P&L statement and you may also have income from someone who did not issue a 1099, how do they really track if/when you declared it without an audit? What triggers an audit in that case? In my case, I'm claiming more income than what 1099's are coming to me, and I'm writing 1099's for 4/5 of that - the total number goes on the P&L statement, not the individual 1099's - although they are reported to the government - do they actually compare?

Exactly!

And here is a good example of why this forum is so valuable to all of us--we draw upon the expertise of those forum contributors who are willing to share their real-life experience with all of us. (Thanks, Eric.)

Form 1040, Schedule C, line F asks you which accounting method is used, as also does Form 1120S (S Corporation), Schedule B, Line 1.

That's why I started having somebody else do my taxes about 3 years ago

Short answer: they can't.

Longer answer:
What they always do is look for someone who reports less income than show up in reported 1099s. They also use industry benchmarks. They know from historical records that someone in a given industry (say music performances) should have x percent of their income reported back via 1099s. If you tax return shows significantly less than that percentage, you may be flagged for audit. Or you could be flagged for audit just by random chance.

They may have other measures that I am not aware of. I did some programming for the tax-fraud division back about 20 years ago. And I had a lot of interesting discuessions with the fraud investigators.

Take a guess what's their largest source for leads.

Answer: (Ex-Spouses)

I know of several couples who have legally stayed together (but otherwise live separate lives) because what would have come out in the divorce would have landed both of them in jail......!

+1! I wish my second ex-wife had understood that concept.

Taxes can be so confusing.

When paying an employee you cut taxes depending on the date of the check, not the date of the work.

If the IRS thinks you are shifting income into a year to save on taxes they can force you to make adjustments. If you consistantly go by the date on the check you are safe. If you go by the date you worked, keep it consistant year after year.