I'm a cash basis business but 1099-NEC Include significant amounts that were not received and deposited until the next tax year, how to correct in TT?

[garyp3]

If I do not correct the 1099-NEC exceeds my gross for the year, let alone I have non-1099 NEC income as well.

[Vanessa A]

When you deposited it, does not matter, however, when you received it does.  So, any income  you did not receive in 2023, would not be entered on your 1099-NEC.  Since you have other income as well, you do not need to separately report the 1099-NEC, this would all be a part of your records and you would use your records to report your income.  As long as you maintain records whether it be in an excel spreadsheet or QuickBooks Self-Employed, you can use these to report your income and just keep the 1099-NEC for your records.  You may want to attach a note to your 1099-NEC so in future years if you need to clarify something you will remember why you did not include all of the income. 

Remember, if the check was in your mailbox on December 31st, but you didn't go get the mail until January 15th, it is still considered income for 2023.  However, if it did not arrive until January 1st or later, then you would not include it on your 2023 return.

[garyp3]

Thank you very much.  I do have complete records as I used QuickBooks.  I could not get TT to import (old version of QB) so I started in using "interview method" and when I put the 1099NEC info in I realized I had this problem.   I'll just undo all the 1099NEC inputs to TT and use the total income figures from QB.  

Thanks again, gephet

[Mike9241]

Just a heads-up. if the total revenue you are reporting is less than the total on all the 1099s for that business, the IRS is likely to make an inquiry

[garyp3]

Yes, I realize that, and it's stupid for them to do that on a single year basis for this reason, among others.  I had them audit me one year for essentially the same reason but different circumstances.  I paid out a large portion of my 1099 income to subcontractors and sent the contractors the required 1099's with the copies and summary sent to the IRS as required.  But the IRS just kept ignoring that.  I finally had to write letters to all my congressional representatives, supplying them with everything, to get the IRS off my back.  Another similar prior circumstance, was when I had a contract with subs that was paying me faster than the subs could do their part of the work, so I was holding amounts as deposits for future work by subs.  IRS audited me several years for that same reason.  They should be using a moving five-year average for comparisons of income reported on 1099 to gross income for the business.  And why this entire 1099 debacle does not apply to corporations escapes me.

[ThomasM125]

You could report the full amount of receipts listed on the Form 1099-NEC's and then enter a miscellaneous expense in an amount sufficient to cancel out the over-reported receipts. That way your receipts would agree with what the IRS shows so you would be less likely to get audited, and you would still be reporting the correct net income.

[VolvoGirl]

That's what I was going to say.....

Enter the full amount from the 1099NEC then you can put the amount in as a Misc Expense on Schedule C line 27a Other Expenses.  Say not received until next year.  Then don't forget to add it again as cash income next year on your return.

[garyp3]

I use QuickBooks, nothing will be forgot.  My question to you is, why should I have to mischaracterize income as an expense, when it's just the opposite?  Sorry, but I'm in the engineering business, I don't call something the exact opposite of what it is.   The IRS needs to be rational, and as long as people play their games they will continue them at our expense.  I don't make money from this idiocrasy as some do.

[VolvoGirl]

It's not an expense.  But that's where you put it as a receivable or as not received.

[garyp3]

As a cash based business it's in hand, or it's not, that simple.  Receivables mean nothing to a cash based business in my view.  They do on an accruable basis, but that not what I use.