If the total recipts you report for the year exceed the amount reported on all 1099s that you receive, you will not have any problems if you only include the income actually earned. However, even if you need to report the full amount, there is a workaround. You will want to report the amount included on the 1099 but NOT earned during 2016 as a miscellaneous expense. Use "1099 income - deferred revenue" as the expense description.
Please note that whether you reduce your Schedule C income or treat the difference as an expense, it will be 2017 income to you that will not be included in the 1099 that you receive from that customer.
