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matthewbarlow
Level 1

Buyer backdated the check and included in 1099NEC

Hi.  I'm an artist. A gallery sold artwork of mine in December 2020, but didn't sent me a check in February 2021.  However, they dated the check December 29, 2020 and then included this amount in my 2020 1099 NEC.  Is that correct?  How should I handle?

1 Best answer

Accepted Solutions
AnnetteB6
Expert Alumni

Buyer backdated the check and included in 1099NEC

If you are a cash basis taxpayer, you generally would not report any income until you have received it. 

 

What they did with regard to not sending the income to you until 2021, but reporting it as 2020 income is not necessarily correct.  However, it may be unlikely that you will be able to get the situation corrected by the gallery.  

 

Since the gallery has indicated on the Form 1099-NEC that they paid the income in 2020, the IRS will expect to see it included on your tax return for 2020.  If you do not include it as income, you should expect a letter from the IRS proposing an adjustment to your return.  At that point, you would have to prove that you did not receive the income in question until 2021 and that you had no other means to get the payment until 2021.  This could prove difficult especially if the delay was due to something like the postal service.  

 

If you determine due to the circumstances that you should report the income in 2021, but your 2020 1099-NEC includes the income, then report the full amount of income on your 2020 tax return along with an expense adjustment to account for the amount that will be reported on your 2021 return.  Be sure to keep good notes for your 2021 return since you will not have a matching 2021 Form 1099-NEC reporting that income.  You will have to enter it as 'cash' on your 2021 return.

 

Take a look at the following TurboTax article for further discussion of the cash accounting method:

 

What is the cash method of accounting?

 

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3 Replies
AnnetteB6
Expert Alumni

Buyer backdated the check and included in 1099NEC

If you are a cash basis taxpayer, you generally would not report any income until you have received it. 

 

What they did with regard to not sending the income to you until 2021, but reporting it as 2020 income is not necessarily correct.  However, it may be unlikely that you will be able to get the situation corrected by the gallery.  

 

Since the gallery has indicated on the Form 1099-NEC that they paid the income in 2020, the IRS will expect to see it included on your tax return for 2020.  If you do not include it as income, you should expect a letter from the IRS proposing an adjustment to your return.  At that point, you would have to prove that you did not receive the income in question until 2021 and that you had no other means to get the payment until 2021.  This could prove difficult especially if the delay was due to something like the postal service.  

 

If you determine due to the circumstances that you should report the income in 2021, but your 2020 1099-NEC includes the income, then report the full amount of income on your 2020 tax return along with an expense adjustment to account for the amount that will be reported on your 2021 return.  Be sure to keep good notes for your 2021 return since you will not have a matching 2021 Form 1099-NEC reporting that income.  You will have to enter it as 'cash' on your 2021 return.

 

Take a look at the following TurboTax article for further discussion of the cash accounting method:

 

What is the cash method of accounting?

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

Mike9241
Level 15

Buyer backdated the check and included in 1099NEC

was there a USPS postmark on the whatever contained the check that was sent to you or any other evidence it was not sent until 2021.  note that once customer placed it the mail it's your income even if the USPS doesn;t deliver it for months.  you would need proof that regardless of the date on the check it wasn't sent to you until 2021.   if this is the case, you should first request a corrected 1099.  if that fails, you could file form 3949-A with the IRS but you better have proof such as postmarked documents. there is no requirement to file that form. in any case if it is truly 2021 income you would need to list the amount as a return and allowance.       

matthewbarlow
Level 1

Buyer backdated the check and included in 1099NEC

Thank you.  Very good advice!

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