Generally, no - almost all taxpayers are on what is called a "cash basis" meaning you report your earnings and expenses in the year in which the cash as received or spent. So, while you may be owed the money as salary or wages, if you have not received it in 2018, it is not 2018 income.
Income is reported in the tax year it is received. It flat out does not matter in what year you may have earned it.
If income is deposited into your bank on Jan. 2, 2020 but is included on your 2019 1099-misc, are you supposed to have the 1099 corrected or move the income from 2020 to 2019 in Quickbooks/taxes?
If someone paid you the income in 2019, it is their deduction in 2019, but that doesn't affect you. If you received it in 2020, then you report it in 2020.
You have to make a decision.
If you report the income based on the tax year on the check, then the 1099 and your income will match, but if you wish, you can hold the reporting of the income to the following year and attach a note to your return. You will have to mail your return, (this cannot be done with electronic filing).
Having the 1099 MISC in one year and withholding Income Reporting to the following year will probably result in questions. You may be 100% correct, but is it worth the exposure.
If I receive a check in November 2021 but don’t deposit it until January 2022, do I claim it on taxes for 2021 or 2022 ?
The year you actually got it and it was paid to you. So when you got the check. What kind of income? If it was paid in Nov 2021 whoever paid you will report it on a 2021 W2 or 1099.
Does “receive” mean having a check placed in my hands or having the amount of the check actually deposited in my account? In other words, can I defer income to 2022 by depositing a check in January 2022 even though it is dated November 2021 ?
It’s a lump sum payoff of a note we’ve held for ten years. I sold a house earlier this year and that jumped up my bracket. I’d like to defer the gain from the note payoff until next year and thought if I didn’t actually have the funds in my account I could say I didn’t actually “receive “ the income.
Sorry you received the check. That counts as you getting it. What you do with the check and when doesn't matter.
The relevant term is "Constructive Receipt."
Your income needs to be reported in the year that you have the ability to access the receipt of the funds, whether or not you open the check envelope or cash the check, but rather the governing determination is that you had the capacity to receive and use the monies, whether you did or not.
As end of year arrives, there is the problematic matter of a check mailed (not ACH, EFT, electronic deposit) in year 1 but because of postal handling time it is not received until year 2.
Thank you for that clarification. Can I assume that a physical check cut by my employer and mailed on Dec 31, 2021 will contain funds that are not available until 2022, since I will not have the ability to access these funds until the check is received and deposited after the new year?
@MJul The reason why @ScruffyCurmudgeon describes the situation as "problematic" is as follows: When the company writes you the check, they have made the funds available to you on their end. If they are a cash-accounting customer, they would no doubt include this income as part of their 1099 that they issue to you. While it is true that you can't have access to it and therefore have "constructive receipt" of the income until you receive the check, the IRS hates inconsistency. So if the other company is deducting it as a cash-basis accounting, and you are cash basis also, then their default expectation is for you to include the income also. See the following IRS website for further information: Constructive receipt of income.
As a possible means to successfully claim this income as not having been constructively received, you could enter such as a negative adjustment to income (such as Line 2 on Schedule C, "Returns and Allowances") this year and then in 2022 include the income as "Other income" (Line 6). Keep documentation showing when you received the income, in case the IRS questions it. And don't forget to report it in 2022.
If you are an employee, however, and the income is reported on your W2, you will not be able to adjust it. And you can be sure your employer won't, either.
My employer paid a Quickbooks invoice from me on December 30, but the money won't appear in my bank account until this week - it usually takes about 4 days. Would I count this as income for 2021 or 2022?
Thanks!
It depends on whether you are a cash basis taxpayer or an accrual basis taxpayer.
Most individuals are cash basis taxpayers, which means you report income when it is received and expenses when they are paid. If you are a cash basis taxpayer, the income will be reported in 2022.
Accrual basis tax payers report income when the invoice is issued and report expenses as soon as they are billed. If you report your business on an accrual basis, the income would count for 2021.
What if a company sends you a 1099-NEC for a payment it made to you in late December 2021 but you did not receive that payment in the mail until Jan. 10, 2022? Do you have to report that payment as 2021 income or can you report that on your 2022 tax return? Will that IRS give you a hard time because that 1099-NEC for 2021 listed the payment?
I received a freelance payment around Jan. 10, 2022 for work done in December 2021. The company listed this payment on the 1099-NEC for 2021. Do head off the hassles you mention, should I ask the company to issue a revised 1099-NEC to list the payment as a 2022 payment? Are they allowed to do that? If not, how certain will it be that the IRS will pay attention to a note I attach explaining this on my 2022 return? Will the IRS hassle me over my 2021 return that does not report this income even though the 1099-NEC reported it? Thanks.
Yes. If your business operates under the cash basis of accounting, technically this income is 2022 income and not 2021. With this said, you can ask the company to send you a corrected 1099-NEC.
If they refuse, I would advise you to report your 1099-NEC as is to avoid any future misunderstanding s with the IRS. IRS has a very good matching system that will match income reported on your return with information recorded on tax forms such as W2's and 1099's. You will wish to avoid any repercussions that might occur over a month's worth of income.
What you can do is report the 1099NEC on Schedule C for 2021 income. Then offset it with a Misc Expense saying income received in 2022. So it will zero it out.
Then next year add it as cash income.
Even though the IRS Publication 525 specifically says this? The company won't reissue a revised 1099-NEC:
For example, if the postal service tries to deliver a check to you on the last day of the tax year but you aren’t at home to receive it, you must include the amount in your income for that tax year. If the check was mailed so that it couldn’t possibly reach you until after the end of the tax year, and you otherwise couldn’t get the funds before the end of the year, you include the amount in your income for the next tax year.
I have a reverse situation. I've always operated my service using an accrual basis, so I base its income on when I invoice a client. However, I have a client who sent a 1099-NEC and they based it on the date paid.
I have an invoice for services from December 2020 that I already included in my 2020 Schedule C. But now, for 2021, I realized that they reported it on their 2021 1099-NEC.
How should I note to the IRS, using TurboTax Home & Business, the discrepancy?
You do not need to enter the 1099-NEC on your return. Since you have your own books that you keep track of all of your income and expenses on, the 1099-NEC's do not have to be reported separately as long as the income is accounted for. When you go through the business info, it asks if you use cash or accrual method of accounting, this will easily explain any discrepancies in your 1099-NEC's received and your income reported.
There is not a way to report that you are not going to report that 1099-NEC on your return this year because it was included in income last year.
If, for some reason, you would happen to receive a letter at some point in the future from the IRS stating you understated your 2021 income, you would just respond as such. Keep the form for your records along with the statement that it was for the previous year.
I started a job in late December, the employer reported the income on 2023 W2, but I did not recieve the income until January 2024. I assume I report the income on my 2024 return, but the W2 is from 2023. How do I report it without a W2?
@burger0980 wrote:
I started a job in late December, the employer reported the income on 2023 W2, but I did not recieve the income until January 2024. I assume I report the income on my 2024 return, but the W2 is from 2023. How do I report it without a W2?
You have to enter the 2023 W-2 you received on your 2023 tax return. The 2023 W-2 cannot be entered on the 2024 return next year.