1099-MISC shows payment sent in December but not received/deposited until January.

[yfegade]

This kind of question has been asked many times - My client sent me a check in December, but I don't deposit it in until January. That payment is included in 1099-MISC. Since I run my business on cash basis, how am I supposed to report this particular payment.

All answers suggest that in such cases IRS's definition of "constructively received" should be used.... which states (per IRS Publication 538) "Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations."

My questions are:

1. In my case, when my client mailed me a check in December, I was out of the country and had my mail on hold. I deposited that check when returned after New Year. I don't even know if that particular check was in-fact received in my hold mail in 2019. In this case, is that payment considered to be "constructively received"?
2. If that payment is not considered to be "constructively received", then how do I reconcile 1099-MISC that my client mailed me (which includes that payment) with reported revenue on my business tax return?

[DavidS127]

Yes, you constructively received the payment if it was in your mail at the end of 2019.  The fact that your mail was on hold does not change the fact that the check was available to you.

[yfegade]

But I don't know for the fact that it was in my hold mail at end of 2019. I picked up my hold mail on 10th January when I returned. My mail was on hold from 15th of December till 10th of January!

I have no way of finding out if that particular check arrived in my hold mail in 2019 or 2020!

[ColeenD3]

Your best bet is to find out exactly when the check was mailed and giving it a reasonable few days to get to you, determine when it arrived.

[yfegade]

I called my client. They said, they printed the check on 23rd December, but due to holidays, it may have been signed and mailed on 26th or 27th...

This puts delivery right at the boundary of end of 2019 and start of 2020.

[ColeenD3]

Use your best judgement. There is no way to know for sure.

[yfegade]

If I decide to account that income in 2020 taxes (best matches with my bank records), then how do I reconcile 1099-MISC on my business taxes?

Is there a way to include entire figure from 1099-MISC (which includes this payment), but take a credit for this check amount while reporting revenue on my business tax form?

[RobertG · Accepted solution]

Yes, you could report the amount as income and take an equal amount as an expense, as long as you report the income on your 2020 return.  

You have a strong circumstantial argument that the income was not constructively received by you in 2020.

[Idalis100]

How would the expense be classified in this situation to off-set the amount of the reported 1099 income?

[KrisD15]

You might have a set of books for the company where the revenue is not recognized until deposited, but for tax purposes it is recognized when reasonably transferred to you. 

If the check was in the mail service, the payer made the payment and can include it on the year-end 1099-MISC.

The IRS will match that 1099-MISC to your reported income, they don't split Form 1099-MISC between years.

You could ask the payer to file a corrected 1099-MISC if you think they did not pay you until 2025, but if their books show the check was cut and mailed in 2024, they will count that as paid in 2024. 

[Idalis100]

We have an app subscription business.  Apple sent us a 1099 for transactions in December 2024, but we did not get paid for those transactions until January 23, 2025.  We tried to get a corrected 1099 from Apple but they refused.  How can we correctly report our revenue if we did not get paid until 2025?

[DaveF1006]

It depends.  More than likely, Apple operates on an accrual basis of accounting thus the only way they could deduct this expense is in 2024, when the service was performed. This is why they refused to issue a corrected 1099 MISC.

if you operate on a cash basis however, then you would report this in 2025.  At this point, there are several options you can pursue.

1. Report this 1099 MISC and record this as income received in 2024.
2. Don't report it at all until next year.  If the IRS inquires why you didn't report it, explain that Apple issued this to you in 2024 because they operate on a accrual basis as an accounting method.  You operate on a cash basis.
3. Report the 1099 MISC, back the income out of your return, and then report the income in 2025. If you report the income in 2025, don't report this on the 1099 MISC but you will report this directly as income in your business return as if you didn't receive any 1099's. 

If you decide to use the third option, record your 1099 MISC in that area of your return and then back it out.

If you are using TT Premium or Home and Business.

1. Log into your account
2. Select Wages and income 
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed..

Here for the description, call it 1099 MISC issued in 2024 but i did not receive payment in 2025 and then record the amount with a minus sign in front.  Make sure though, you include as income next year on your business return.

As a best practice, I would report this on your 2024 return though unless you are adamant about reporting this in 2025 for accounting purposes.  I say this just to avoid any confusion the IRS may have and trigger an audit.