1099 Does it count as 2008 income?

MrJ71 · #1 (**permalink**) 02-04-2009, 08:32 PM

If I billed my client on 12-20-07 for payment due on January 1st 2008. I got the payment in January and deposited it in January. Does it count as 2008 income? It wasn't on the 2007 1099 and its not on the 2008 1099. Looks like they cut the check on 12-31-07, but I didn't get it until 2008.

TaxGuru · #2 (**permalink**) 02-04-2009, 11:02 PM

The IRS would accept a either the cash method of accounting or the accrual method of accounting. Any of these methods used in your business and reported on the individual tax return with the same consistency is acceptable to the IRS.

Thus, if you are employing the cash method of accounting on your tax return, and have not reported the income on your 2007 individual tax return (like you have mentioned), then the amount deposited in January 2008 would be income that is to be included in the 2008 tax return.

MrJ71 · #3 (**permalink**) 02-05-2009, 08:46 PM

So should I try to have the client correct the 2008 1099.

TaxGuru · #4 (**permalink**) 02-06-2009, 11:47 AM

No, it is not necessary!

MrJ71 · #5 (**permalink**) 02-07-2009, 10:05 PM

Thanks Tax Guru

TaxGuru · #6 (**permalink**) 02-07-2009, 10:44 PM

You are welcome!

MrJ71 · #7 (**permalink**) 02-08-2009, 10:20 PM

Hi Tax Guru, this should be my last question on this subject. The tax softeware has a place to report the 1099 income. The 1099 from the client was for $16,200.00 and the amount that I received and deposited was $18,000.00. Do I report the $18,000.00 instead of the $16,200.00 in the section provided for this 1099 or do I report the $16,200.00 in the section provided for this 1099 and report the $1,800.00 difference somewhere else on the tax return? Did that make any sense?

TaxGuru · #8 (**permalink**) 02-08-2009, 11:16 PM

I think you should report the total amount deposited and not the amount reported on the 1099-Misc. In case of an IRS audit, you would be required to pay tax on the amount of income earned. So, if you have not reported the total amount that was earned you would be subject to tax on the amount not reported along with possible interest and penalties. It is therefore, best to report the that was received and deposited in 2008 rather than the lesser amount that was reported on the 1099-Misc.