1099-NEC vs 1099-K, same income, not the same income on form

[cMatos97]

I received a 1099-NEC from my client for 21K, also received a 1099-K from Google Pay for 18K (since we switched from regular checks to GPay from April-Dec 2020). Problem is, both forms say to report income, but that would be inaccurate and double count most of my income. I'm not sure if there's a way to not be audited here. Any tips?

[MaryK4]

If you have your business books and records, they should show the amounts of your income transactions.  While you do not have to send to the IRS, if you get examined you will have to show the records so you can prove the source and the dates received to match with the 1099-K records(which will show the monthly totals).  It is possible that a 1099-K and the 1099-NEC show some or not all of the business income.  The telltale flag for audit is if your business income is less than one or both of the forms! 

From the IRS: (Understanding Your Form 1099-K | Internal Revenue Service)

It is important that your business books and records reflect your business income, including any amounts that may be reported on Form 1099-K. You must report on your income tax return all income you receive from your business. In most cases, your business income will be in the form of cash, checks, and debit/credit card payments. Business income is generally referred to as gross receipts on income tax returns. Therefore, you should consider the amounts shown on Form 1099-K, along with all other amounts received, when calculating gross receipts for your income tax return.

[cMatos97]

Thank you for your response @MaryK4 ! I do have clean records of all transactions. But I’m still unclear on how to file. Both forms say I’m required to file them since both entities filed on their end. However if I file both the 1099NEC and 1099K, how do I show on the tax forms that I didn’t make 39K, but rather 21K? As far as I understand, when I plug in both forms on TurboTax, it’s counted as 39K income, which isn’t right. If I list 18K as an expense to negate the 1099K that’s highly suspicious and I’m sure will lead to audit. 
If I don’t file the 1099K then I’m sure that will lead to audit as google pay submitted their form. Is there a way to file to acknowledge the forms without counting it as my income? If not I can deal with the audit, but naturally I’d like to avoid the whole procedure. Anymore help is appreciated.

[KathrynG3 · Accepted solution]

Yes, the best way to do this is to report the forms and the adjustment in your business by following these steps:

1. Report the income as received in the COMMON INCOME section:
   1. Form 1099-NEC under Form 1099-NEC, new IRS form for nonemployee compensation (replaces 1099-MISC).
   2. Form 1099-K under Other self-employed income, includes 1099-K, cash, and checks.
2. Report the offset:
   1. Scroll down to EXPENSES and click in the lower left hand corner, Add expenses for this work
   2. Scroll to Other miscellaneous expenses select the toggle, scroll to the bottom of the page and click Continue.
   3. Enter a Description for your offsetting amount, such as Form 1099-K included in Form 1099-NEC reporting and Continue.

@cMatos97