Stripe payments "Order on" vs. "Available on" dates | Amend vs. Schedule C

[mogwai]

Background/Problem

In 2021, I started collecting online payments through Stripe. I report as a sole proprietorship.

For my 2021 tax year, I did not qualify for a 1099-K, so I reported on payments captured (order date) between 01/01/21 and 12/31/21.

For my 2022 tax year, I did qualify for a 1099-K. The problem is, Stripe 1099-K reports charges based on "Available On" date instead of the order date.

This resulted in payments from the end of 2021 being reported on my 2022 return which was already reported on my 2021 return.

Question

Is there any way to resolve this without amending my 2021 return? For example, adjusting the 2021 over-report in the 2022 Schedule C, miscellaneous? If that is allowable, is it a bad idea from an audit perspective? 

I was hoping to avoid amending, not only due to the work, but I found a single issue last year that required me to already amend years 2017 through 2020. So this would be the fifth year amendment in a row. Should this be viewed as an audit concern?

Thank you!

[JulieS · Accepted solution]

Whether you report your income on the order date or the available date depends on whether you are a cash basis taxpayer, or an accrual basis taxpayer. 

Cash basis taxpayers report their income when they receive it (available) and expenses when they pay them. 

Accrual basis taxpayers report their income when they earn it (order) and expenses when they are billed. 

If you look at your Schedule C , line F shows your accounting method. 

If you are an accrual basis business, you can adjust your 1099-K by entering a negative income item with the description "Income included on 2021 tax return". 

If you are a cash basis taxpayer, you should amend 2021 and report your income for 2022 based on your 1099-K.

Amending your return doesn't not increase your audit risk. 

[mogwai]

Thank you so much @JulieS . So a wonderfully clear and thorough response. This makes perfect sense. One quick follow-up question. Since I am cash method accounting, I will need to do the amendment. Any advise on the "reason" explanation to include?

Thanks again!

[AliciaP1]

The reason "income reported in 2021" will be appropriate in your situation.

@mogwai