the FTB is wrong but most likely you won't be able to get them to change the 1099. this is a constant problem for cash basis taxpayers where customers put the check in the mail on 12/31 so they can take a deduction but even with expedited delivery, the seller doesn't receive payment until the following year. landlords also face this problem when rent is due on the first of the following month which requires the tenant to put the check in the mail towards the end of the month.
here what the IRS says
§ 1.451-2 Constructive receipt of income.
(a) General rule. Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions.
or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. that's by you and usually applies to a deposit account.
so that he may draw upon it at any time, you could not until you had physical receipt of the payment. the date you actually deposited it is irrelevant. if it's in your mailbox you have constructive receipt on that date.
