My husband received a 1099misc for $48,000 but he still hasn't received the last payment of $12,000; and it is past December 31, 2017. What year do we claim that income?

[kimball-dunlap]

Does he need to request a new 1099 for 2017 and the remainder of the income will be on a 1099 for 2018?

[Critter]

Contact the payer ... did they send the check out yet ?  If not have them correct the 1099.

[kimball-dunlap]

Not sure. So, at what point is the money 2018 not 2017 income? Example: if we get the check tomorrow and it is dated December 2017 is it still 2017 income?

[Hal_Al · Accepted solution]

The standard is 'Constructive Receipt'

The income has been credited to the taxpayer's account or otherwise becomes available for him or her to draw upon in the future. Constructive receipt of income prevents taxpayers from deferring tax on income or compensation they have not yet utilized or spent. Reference: https://www.investopedia.com/terms/c/constructive-receipt.asp#ixzz535S7GQhS

From your description, you did not have constructive receipt and the income should go on next year’s return.  If you get the check tomorrow and it is dated December 2017 it is not 2017 income. Your problem, apparently, is that the payer wants to deduct it in 2017. So, he’s included it on the 2017 1099-Misc. So, he’s probably not going to want to issue a corrected 1099-misc.

 If you received an erroneous 1099-Misc, you have several choices (I would use #3):

1. Ideally, you get a corrected 1099-misc from the payer

2. Don't report it on your return. Attach a copy of the 1099 and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.

3. Report the Income on schedule C and take a deduction under other expenses, call it something like "constructive receipt adjustment"

4. Do report the extra $12,000, and hope you can explain it away when & if the IRS contacts you

[TaxGuyBill]

I agree, #3 is probably the best option.

[VolvoGirl]

Then next year on your 2018 return you will have to enter it as income. So don't forget it.

[kimball-dunlap]

Thank you for your answers. I think we are going to wait to the payment to arrive and let them know the 1099 needs to be adjusted for 2017.

[TaxGuyBill]

For them, the 1099 might NOT need to be adjusted.  If they SENT the payment by December 31st, it SHOULD be on the 1099, and you need to make the adjustment.

[kimball-dunlap]

Thank you TaxGuyBill for your help but I'm now really confused. So if mailed by Dec 31 it goes on their 1099. I include it as income on the schedule C (like normal); Your comment above "take a deduction under other expenses, call it something like "constructive receipt adjustment"" what type of deduction am I taking other then my normal business expenses?

[TaxGuyBill]

It is not a 'real' deduction.  It is just a way to report your proper income and avoid an IRS notice.

For example, let's say the 1099 says $100,000, but you only received $90,000.  For your tax return to be correct, you need to report $90,000 of income because that is what you actually received.

However, the IRS sees $100,000 on the 1099.  So to prevent the IRS notice, you could report $100,000, then enter the $10,000 as a deduction to give you the proper reporting of $90,000 of income.

You just need to keep in mind that your tax return needs to report what you actually received, regardless of whatever a 1099 may say.  As was pointed out, next year the 1099 won't show that extra amount, so you will need to manually enter that on next year's return because you didn't receive it until 2018.


On the other hand, I don't understand how they already sent a 1099 with the full amount and you received that before January 1st, but you did not receive the check yet.  That seems weird.

[kimball-dunlap]

He received the 1099 via email yesterday. There will not be a 1099 in 2018 because the consulting work was completed during 2017 and paid in 4 installments. I'm just trying to handle this correctly. Your explanation helps. My husband thinks this person (only a one person company) cut a check to be paid on Dec. 31 via quickbooks or something but because of the holiday it probably wasn't actually mailed until after Jan 1. So, it's all very confusing. Thank you for your help.