Technical topics regarding tax preparation.
28-Mar-2020 12:19pm
- Posts:
- 5073
- Joined:
- 21-Apr-2014 9:42am
- Location:
- CA
Cash basis C-Corporation with a 3/31 fiscal year-end received a $300K payment from a customer on 3/27 they were not supposed to* receive until April. The funds were wired into their bank account.
Can they send a check back to the customer and avoid recognizing this income in March?
* I say "supposed to" because this is an annual contractual payment from this customer that is due in April each year. I have the client checking the contract to see if there is any language prohibiting a prepayment. I am doubtful there is such language, though.
28-Mar-2020 12:23pm
- Posts:
- 4074
- Joined:
- 21-Apr-2014 8:58am
- Location:
- California
Constructive receipt. I don't see that returning the check is going to do you any good. Receipt isn't even constructive. It's actual.
Is the receipt in the nature of a deposit? Is your client contractually obligated to return the cash if he doesn't provide the goods/services?
28-Mar-2020 1:19pm
- Posts:
- 6103
- Joined:
- 22-Apr-2014 3:06pm
- Location:
- WA State
It isn't 3/31 yet.
Have your client write a check back to the customer on Monday.
The customer can write you another check on Tuesday.
~Captcook
28-Mar-2020 3:36pm
- Posts:
- 4074
- Joined:
- 21-Apr-2014 8:58am
- Location:
- California
It isn't 3/31 yet.
LOL. Good point.
28-Mar-2020 3:41pm
- Posts:
- 6103
- Joined:
- 22-Apr-2014 3:06pm
- Location:
- WA State
JAD wrote:It isn't 3/31 yet.
LOL. Good point.
Admittedly, there are a host of other issues with this approach, but it
would solve the issue.
~Captcook
28-Mar-2020 3:49pm
- Posts:
- 5073
- Joined:
- 21-Apr-2014 9:42am
- Location:
- CA
OK. So there is nothing wrong with this. Just send the money back with a note saying "No thank you!".
They are not concerned about being able to re-collect this amount. Even in this new economy.
28-Mar-2020 4:30pm
- Posts:
- 6103
- Joined:
- 22-Apr-2014 3:06pm
- Location:
- WA State
Wiles wrote:OK. So there is nothing wrong with this. Just send the money back with a note saying "No thank you!".
They are not concerned about being able to re-collect this amount. Even in this new economy.
There's no TAX rule that says you can't do this. From a business standpoint, there's some real risk if nothing more than the customer is probably planning to have that disbursement be reflected on their books. I would have a discussion with the customer before sending it back.
~Captcook
28-Mar-2020 4:36pm
- Posts:
- 5073
- Joined:
- 21-Apr-2014 9:42am
- Location:
- CA
Yes. Good point. Customer goodwill needs to be considered.
For this situation, it is not applicable. This customer is a publicly-traded pharmaceutical company.
Return to Taxation
Who is online
Users browsing this forum: dellpaul, Google [Bot], GRobCPA, HowardS, lckent, Nilodop, RiversideCPA, sjrcpa, SumwunLost, TAXMASTER, TexasTaxCPA and 119 guests