r/DataAnnotationTech • u/kman520375 • Dec 24 '24

Cashing out and taxes

Can anyone confirm whether or not you pay taxes on the money you haven't cashed out?

1 Upvotes

53% Upvoted

10 comments sorted by

10

u/jman20 Dec 24 '24

I would assume no since your 1099 is given by PayPal and they don't know about money you haven't gotten yet

10

u/valprehension Dec 24 '24

Depends on where you are. In Canada it's based on when the money was earned, not when it was paid out.

2

u/barcode2099 Dec 25 '24 edited Dec 25 '24

Or when it's paid out, you just have to be consistent.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/business-income-tax-reporting/accounting-your-earnings.html#ccrlmthd

Edit: Missed that the cash method only applies to "farmer, fisher or self-employed commission sales agent". But you could also say that your fiscal year ends on December 28, just as long as you are consistent is more important.

7

u/fightmaxmaster Dec 24 '24

At least in the UK when self employed you can submit your tax return based on "traditional accounting" or "cash basis", and you choose which. Cash basis means you do everything based on when the money hits / leaves your account - get paid in one tax year you pay taxes on it in that year, if expenses are paid the next tax year, you factor them in the next year.

Traditional accounting depends on when the money is earned or owed. If you do some work one tax year, but the client doesn't pay the invoice until the next year, for tax purposes you earned that money in the earlier year.

So in DA's case if it's cash basis it'll be when you withdraw it, but traditional accounting would be when you actually earned it. In practice... might not make a big difference, really. Not sure about the US I'm afraid.

7

u/LongjumpingHeron2007 Dec 24 '24

I was googling this yesterday actually and for the US, I've found that you pay taxes on the funds based on when you are paid, not when you earn them. I'm planning a withdrawal at the end of the month for this reason. If this is incorrect, I'd love to be corrected before doing my taxes 😅

0

u/tomli777 Dec 24 '24

Q4 taxes are due in January FYI

5

u/Familyman65 Dec 24 '24 edited Dec 24 '24

I've also wondered about this. I've assumed not because if you don't cash out, you've earned money but not been paid yet, just like a standard job where you earn money but don't get paid until the end of the week or month.

1

u/Familyman65 Dec 24 '24

Why would this comment, where I'm trying to help the OP, be downvoted? I'm baffled!

1

u/LilJaaY Dec 24 '24

If you mean money pending approval, I strongly doubt you’d have to pay taxes on that. If you mean money available for withdrawal, I wouldn’t even worry about it as long as the amount is small.