Tax Law (Questions About Taxes)/1099-misc

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QUESTION: I received a 1099-misc from a client for whom I did a lot of consulting in 2014.  However, their last payment to me in 2014 was processed via wire transfer on December 31, 2014 and it appeared as a wire in transit in my bank account...I did not have access to the cash until 2015.

I'm using TurboTax and when filling in the details of my 1099-misc, how can I adjust this amount downward so that it only includes the amts I received in 2014.  I'd hate to have my tax return not equal the 1099 that my client files with the IRS.  I will pay estimated taxes on April 15, 2015 which will cover that last payment.

What should I do?  Write a letter to the IRS explaining why my tax return differs?

ANSWER: Trey,

Thanks for your question.

If the bank credited your account on Dec 31, then you should count is as 2014 income.

If you have other Schedule C income apart from the 1099, this IRS would not likely pick up on the fact that the 1099 and what you reported does not match. Assuming this is the case, just enter into line 1 the total amount of revenues you have and don't input the 1099.  The return does not break out the portion of your revenues that are represented by 1099's.

Whatever you do, don't send them a written explanation with the return. I probably won't get read and it may confuse things.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: The 1099 in question is the only one I received for 2014...I have no other consulting income or 1099 income from any other source or client.

So, if I report $300k as consulting income on my Schedule C, but my client reported $330k as payments to me, then wouldn't the IRS flag this immediately...that I underreported?

As far as my bank goes, it was not credited when I looked on New Year's Eve (yes, I was up looking at my bank acct on-line), but two days later, the wire was dated 12/31/14.  So it was essentially back-dated.  As I had asked my client not to pay that last invoice until 2015, I did not pay any estimated taxes on this amt. Including this last pmt on my 2014 return may cause me to pay a penalty.

Answer
The problem you have is that all the evidence indicates that the funds were available on Dec 31, so any amount less than the 1099 amount that you report will likely generate a CP-2000 asking for you to pay the taxes on 1099.  Since they can't match the 1099 with your return, the CP-2000 would ask for the taxes on the entire amount.  Granted, you can get it straightened out, but it would be a hassle to do so.

Not really much you can do, other than get the client to issue a corrected 1099 or take your chances with the IRS.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

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DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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