I received a 1099-misc.It includes payment of an invoice from 2016 paid in 2017.I run on a cash basis. How do I adjust/report 1099 in turbotax 2016.

[rayweinberg3]

the 1099-misc contains a January 2017 payment, the Turbotax has me enter the 1099-misc as received.

should I enter an incorrect number in turbotax, or put an offset some place else to match my cash basis.

if i enter a different ammont than on line 7 is that not a red flag?

[JaimeG · Accepted solution]

Yes,  that income should be accounted for in your 2017 Tax Year Business Income. In light of this I would suggest that you contact the issuer of the 1099-MISC and request that they correct the amount of the 1099-MISC and issue you a new document. This is recommended because the IRS does cross-reference the income that you have reported with the income that has been reported on your behalf through instruments such as 1099-MISC.

If you cannot receive a correct document from the issuer you must prepare your return with the correct amount and mail your return with a statement citing the discrepancy. You cannot E-File your return if you choose this path.

[idguy007]

If the payment by the 1099-MISC issuer was made in 2016, but as the payee I did not receive it until 2017, the 1099-MISC is correct as far as the issuer is concerned.  How do I reflect the difference on my tax return?

[LarryPoz]

I don't see a large company that works on accrual basis resending a corrected 1099. In their books it was paid in 2016. 

I have always read that you file your income (proof is in YOUR accounting). TT used to ask if the amount you entered is different from the 1099 and you were to explain it was due to accrual versus cash accounting.

Thoughts?

[KrisD15]

There are companies that keep two sets of books, one for investors and one for tax. 

Regardless of their accounting system, a 1099-MISC is only sent to the contractor for the year in which the contractor was actually paid. 

Whether the work was done (earned) is of no consequence. The tax is due when the income is received.  

[LarryPoz]

Okay, so you are saying the reporting company is correct by entering the amount paid on the 1099-misc. I believe we all agree. The real issue/question is - I didn't receive the payment until the following tax year and would be correct to account for this in the new tax year, according to cash accounting practices, correct?

I am willing to bet most independent contractor face this every year. What is the best way to handle.?

[KathrynG3]

Yes, the income can be reported on a Cash Basis.  To report this in TurboTax, follow these steps. Be sure that the income reported in the next year is added next year in the same area, less common income.

To declare this income as Other Common Income from Form 1099-MISC:

1. From the left menu, select Federal
2. Wages & Income, Scroll down to Other Common Income
3. Click Start by 1099-MISC

To subtract the portion not received until the next year and/or add the portion from the prior year received in the current year:

1. From the left menu, select Federal
2. Wages & Income scroll all the way down to Less Common Income and click Show More
3. Select the last listed option for Miscellaneous Income 1099-A, 1099-C, click Start
4. Next, select the last listed option Other Reportable Income
5. Did you receive any other taxable income, click yes
6. Other Taxable Income: Enter your description and the amount as a negative and click Continue and Done.

This will create a net 1099-MISC amount that is accurate for Cash Basis.