You can. The 20k could raise a flag with the IRS as anything over 10k triggers a notificaion. However, if you offset it against doing business (classify it as deposit on COG - cost of goods/services) and should the IRS ever enquire, you'll just have to explain it. Not the end of the world. You should track all of your expenses so that when you get final payment from the company you are doing work for, you can deduct them and pay tax just on profit.
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Submitted 345 days ago...
Received deposit in November of 2007 for work to be done in 2008. Do I report this as profit?
Is there some way that I can not have to pay tax on a $20,000.00 deposit received in November of 2007 for work to be done in 2008? I need the money to last for atleast 5 months to meet expenses in 2008. I don't consider this money to be a $20,000.00 profit just because I received it close to the end of the year before I spent it.
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