I am a self-employed carpenter and did a favor for a family member. Basically the family member bought a house and rennovated the house on their own. The bank required an actual contractor to be listed as doing the work. The bank issued a check with my company and the homeowners listed on the check. The homeowners deposited the check in their acct. and did the work themselves. My question is, I believe that I will receive a 1009 for this check as income, what can I do to show this was not income. Do I issue a 1099 to the homeowners?

“I believe that I will receive a 1009 for this check as income, what can I do to show this was not income.”---->You need to include the income in full on a Schedule C line 1 and then to deduct the same total amount in the Other expenses on line 27 with a note as to how the income is being reported. By reporting the income that matched the 1099-MISC the IRS computer does not send a letter for a mismatch between the information return adn the corresponding individual return. This is a method to indicate on your return how the income is to be reported.
“ Do I issue a 1099 to the homeowners?”---->I do not think so; the 1099-MISC tax form is an informational tax return of sorts. It tells the IRS who you paid certain monies to during the year. Ostensibly, this information is used to see if the people you report on are reporting the correct amounts of money paid to them.