Received 2022 1099-MISC for Payment received 2023

[Viking99]

We received a 2022 1099-MISC from California Franchise Tax board (FTB) for the Middle Class Tax Refund (MCTR). However, we didn't receive the payment until (January) 2023.

This may be a mute point because the MCTR money may not be taxable on the federal return anyway (from what I read here)?

However, in general, how is this supposed to work when the issuer submits a 1099-MISC for payment issued at the end of year, but the recipient doesn't receive the payment until the following year? Can the Tax payer argue that the 1099-MISC is for the wrong year and declare it the following year instead...? How?
I tried to ask FTB to correct it (using Chat) but they said that it is the issue date that counts, not the date the recipients get the money.... Is that correct?

[Mike9241]

the FTB is wrong but most likely you won't be able to get them to change the 1099. this is a constant problem for cash basis taxpayers where customers put the check in the mail on 12/31 so they can take a deduction but even with expedited delivery, the seller doesn't receive payment until the following year.  landlords also face this problem when rent is due on the first of the following month which requires the tenant to put the check in the mail towards the end of the month. 

here what the IRS says

§ 1.451-2 Constructive receipt of income.
(a) General rule. Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions.

or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. that's by you and usually applies to a deposit account. 

so that he may draw upon it at any time, you could not until you had physical receipt of the payment. the date you actually deposited it is irrelevant. if it's in your mailbox you have constructive receipt on that date. 

[Viking99]

So what can a tax payer do when the 1099-MISC is for the "wrong year" and the issuer refuses to change it?

Complicating this is that the IRS instructions:
https://www.irs.gov/instructions/i1099mec

"File Form 1099-MISC, Miscellaneous Information, for each person in the course of your business to whom you have paid the following during the year...."

So from the issuers perspective it was paid during the year, but the recipient didn't receive it until the next year.
So it appears that the issuer may have acted properly and the tax payer could report it differently?

[kkt2]

I have the same issue this year. How did you report it last year?

[DawnC]

• California: The Middle Class Tax Refund is exempt from federal and state taxes
• A cash basis taxpayer reports income when it is actually received, and reports expenses when they are paid. The majority of people who file individual income tax returns are cash basis taxpayers.

See Pub 538 - see page 8 @kkt2 

Under the cash method, you include in your gross income all items of income you actually or constructively received during the tax year. If you received property and services, you must include their fair market value (FMV) in income.

[kkt2]

Hi

I have a C corp. I received a check in 2024. But they are included in my 2023 1099 NEC. I wanna figure out how to report it. Most people said just report the 1099nec amount and then deduct them in miscellaneous expenses. Should I follow this advice?

[DawnC]

You can do that, but you have to remember to include that amount on next year's return, since it won't be on next year's 1099-NEC.   @kkt2    Keep detailed records in case of an inquiry.