Got a 1099Misc for rental inc from management co., but it shows both 2019 income & some we didn't get until 2020. How do we handle income not rec'd until 2020?

[famfan]

Management company handles collecting rents. They received January's rent (2020) December 31 (2019). We didn't receive it from them until January 7, 2020. Can we delay reporting that amt until the 2020 tax year?

[JohnB5677 · Accepted solution]

You are correct.  You are on a CASH basis accounting, and since the money wasn't available until January 7th it should go into 2020.  Here are the concerns about this.

• The management company probably mailed the check late in 2019 and is  not going to be willing to change your 1099-MISC.
• You could write a note to the IRS explaining what happened.  Deduct the rent from the 1099, and mail the return in (you could not E-File).  There is no question that the IRS would want to know more.
• You could bite the bullet and include the rent in 2019 and let it be at that.

[AmeliesUncle]

I think it needs to be claimed in 2019.

You authorized your 'agent' (the management company) to receive the income.  That means you had "constructive receipt" of the funds in 2019.

From 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.

[Hal_Al · Accepted solution]

Actually you have a choice.  You can count it as 2019 income if you want to.  That would be simplest and not require any work around on your tax forms.

That said, you can also save it for 2020, if that works out best, for you.  You do not need to attach any statements (write a note to the IRS) and you can still e-file.

Report the entire 1099-Misc amount as income. Under Other expenses, claim a deduction for the Jan.  rent not received.

[famfan]

Thanks everyone!

[famfan]

You are correct about the management company. They received the rent December 31. Ugh. We talked to them, and even sent them a certified letter asking them to change it, but they wouldn't. I know the IRS will definitely flag this. But can I really not e-file because of this? They are going to want an explanation either way, so at least by e-filing we can get the ball rolling faster.

   We really cannot bite the bullet without having to owe a lot more taxes because of this. We terminated our relationship with the management company so as to avoid this in the future.

[famfan]

You are correct about the management company. They received the rent December 31. Ugh. We talked to them, and even sent them a certified letter asking them to change it, but they wouldn't. I know the IRS will definitely flag this. But can I really not e-file because of this? They are going to want an explanation either way, so at least by e-filing we can get the ball rolling faster.

   We really cannot bite the bullet without having to owe a lot more taxes because of this. We terminated our relationship with the management company so as to avoid this in the future.

[Hal_Al]

 "I know the IRS will definitely flag this".  No. It will not get flagged if it is included on line 3 (rents received). Then take a deduction on line 19.

"But can I really not e-file because of this"?  No. You can't efile if you attach a separate statement.  Line 19  includes an e-fileable statement, if there are too many words to fit on line 19 (I would keep it simple "Jan 2020 rent not rec'd in 2019')