Accounting method for (expat) sole proprietor

Forum|Forum|3 years ago
April 16, 2023
1 reply
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Hello,

I am a US expat based in France where I started independent consulting work as an "autoentrepreneur" (i.e. sole proprietor).

I took on my first client in Q4 of last year, completed two-thirds of the project before year end, but did not receive my first payment until January 2023. I am still waiting on additional payments from the client, due to their long bill processing cycles.

For French taxes, I am required to report income on a cash basis and receive a percentage deduction for expenses. Since I did not receive payment until 2023, that means all my reporting should be on my 2023 return.

For my US tax return, it makes sense to me that I should use the same cash accounting method, instead of the accrual method. That said, it seems strange to me that most of the project work was done in 2022 while the income should be reported in 2023.

Am I approaching all this correctly?

Thank you,

JohnB5677

In general the Cash Metod is the default unless you select otherwise.

The income would be posted to 2023 if you are using Cash Basis accounting, and you use the calendar year as your fiscal year. You would book transactions in the year they occur.

If you were to use the Accrual Method, it will show as revenue in the year that you prepared the invoice (2022).

If I've misunderstood your question, and this does not completely answer it, please contact us again and provide some additional details.

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