Sally is a sole proprietor who provides dog walking services to dog owners. Since Sally is a sole proprietor, her business income and expenses are reported on the Schedule C of her tax return. Sally has timely filed her returns using a calendar year since she first filed a return 10 years ago. Terry hired Sally to walk his dog while he was out of town on December 15, 2018. Sally walks Terrys dog on December 15, 2018 and bills Roger on the same day. Sally received payment from Terry in the form of a check on January 2, 2020.

In which tax year does Sally recognize the income from her dog-walking if she uses the cash approach?

How does our answer change if Sally uses the accrual approach?

May Sally change to a non-calendar year as her taxable year (i.e. a fiscal year ending on a day other than December 31st?

What if Sally does not keep accounting records?