Paid January for work in December. When to report expenses?

[Deleted]

My wife did some side work in the same field as her w-2 job.  She had travel expenses relating to this work of almost $700. The work and expenses were in the last week of 2012.  She was paid over $1500 on 1/2/13.  We will receive a 1099 next year for this amount.

Do we wait until next year to claim the expenses against the income or do we report the expenses in the 2012 tax filing?

[Rocky Mtn Saver]

Same as when the 1099 is filed. 

[TheOtherMe]

What about cash basis?  When were the expenses paid?

[mwcpa]

As a cash basis taxpayer the expenses are deducted when paid, unless the expenses are "reimbursable" (by example client expenses for an attorney).

[Deleted]

  Ok, I respect MWCPA from his prior postings so I will follow his advice. ( I assume you are male from the photo.) The expenses were paid and the mileage occured in December so I will take the deductions in tax year 2012 and report the income in tax year 2013.  I am a cash basis taxpayer.  By the time I get audited for this year I will have probably already filed for 2013 and they will see the income there.

Thank You for your help.

[mwcpa]

A loss on a schedule c is allowed as long as you can, amongst other factors, show an intent to make a profit.