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Level 1
posted Feb 13, 2022 2:29:09 AM

1099 NEC is accrual and I use cash basis. How do I account for differences?

I received a 1099 NEC where the amount in box 1 is about $5,000 higher than what I calculate because I use cash basis and the company that sent the 1099 is accrual basis.  How do I account for the differenct?

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1 Best answer
Expert Alumni
Feb 13, 2022 5:11:54 AM

There are two different ways to handle this. Please see this answer from DDollar:

 

Your customer should not be calculating payments made to you on an accrual basis.  Individuals must prepare their taxes on a cash basis.  If your customer included payments not yet made to you as of 12/31/21, you have two choices:

  • Contact your customer and request a corrected 1099. or
  • Include the full amount reported on the 1099 as income and then deduct the amount not actually received as "Other Expenses". 

If you choose the latter of the two, be sure to include in your 2022 income the amount you exclude for 2021.

1 Replies
Expert Alumni
Feb 13, 2022 5:11:54 AM

There are two different ways to handle this. Please see this answer from DDollar:

 

Your customer should not be calculating payments made to you on an accrual basis.  Individuals must prepare their taxes on a cash basis.  If your customer included payments not yet made to you as of 12/31/21, you have two choices:

  • Contact your customer and request a corrected 1099. or
  • Include the full amount reported on the 1099 as income and then deduct the amount not actually received as "Other Expenses". 

If you choose the latter of the two, be sure to include in your 2022 income the amount you exclude for 2021.