Client reported paying more than they did

[Questionsgalore]

I submitted an invoice in 2025 that they never paid. In addition to that I had a large project that they asked me to split into two invoices. The first part they paid in December, the second part they requested I don't submit until later. Not a half up front half after completion, just please wait a few months we don't have money for this. But their accountant took my estimate and counted it towards 2025. I pointed out this several thousand dollars discrepancy and they said it was a QuickBooks issue and asked me to accept it (basically inferring they don't want to change anything.) My biggest concern is I don't have a lot of money and Im already penny pinching. I'm worried about paying my taxes and this would make my taxes even larger. I have never had this issue so I don't even know if it would count as fraud. Can someone help me understand if this is normal or just inappropriate accounting.

[DaveF1006]

It depends on how you define normal. The main issue is a difference in accounting methods. You report income in the year you actually receive the money. Since you didn't get the cash for that second invoice until 2026, it's 2026 income for you. 

Their accountant likely uses "accrual" accounting, where they record the expense the moment they receive your invoice or estimate. They are trying to "pull" the deduction into 2025 to lower their taxes, even though they haven't paid you yet. if this is the case, they should not issue a 1099-NEC reflecting that amount, basically asking you to accept their accounting method. 

This isn't fraud, but a difference in accounting methods. You do need to protect yourself from an IRS Automated Underreporter (AUR) notice. The IRS computers will see a 1099 for, say, $10,000, but your tax return only shows $7,000. This triggers an automatic letter. Their refusal to issue a corrected 1099 NEC can produce dire consequences for you.

Fortunately, there's way to report this in TurboTax to protect yourself and to adjust the extra income reported by their accountant.

Create an "Adjustment" to back it out:

1. In the Wages & Income section, go to Self-Employment Income (Schedule C).
2. Under Expenses, look for Miscellaneous or other expenses.
3. Enter a description like: "Erroneous 1099 amount - income not received until 2026" or "Adjustment for unpaid 1099-NEC income per Cash Basis accounting."
4. Enter the discrepancy amount (the unpaid thousands) as a positive expense.

As a result, your "Gross Receipts" will match the 1099 (keeping the IRS happy), but your "Net Profit" (the amount you‌ pay taxes on) will only include the money you‌ received for 2025.

One final note, on next year's return, you will need to add that amount as income on your 2026 return, in addition to the 1099 NEC's you receive. There is an entry in your Self-Employment income section to add that in as "other income".