1099 vs Income reported

[yeknod]

TP'S income is less than 1099's received.  TP is on cash basis.  Should the 1099 income be reported to avoid problems in the future?  All deposits on bank statements were reported as income.  Some of the checks were received in January 25 but were dated in 24.  It is an S-Corp now for 2024 taxes.

Thoughts?

Thanks in advance.

[IRonMaN]

Report what they actually received for the year.

[yeknod]

So, don't worry about the 1099''s being more than the income reported?  Seems like that could be a red flag

TP is cash basis.   

[sjrcpa]

But if you and the client have good records to support what is on the return, then you have an explanation for IRS if the need arises.

One question, though - is this the type of business that might receive cash and not deposit it?

A number of years ago I had a self-employed plumber. He said - I guess I have to tell you about my cash jobs, too, don't I?

[BobKamman]

What ID number is on the 1099s?  SSN or EIN?  If the EIN, why are they issuing them (I know, there's no law against it and many payers will do that).  If SSN, your real problem is IRS matching them to a non-existent Schedule C.  

[sjrcpa]

@BobKamman It could be 1099-Ks, too.

[yeknod]

No cash, the difference is some checks were received in January and were included in the 1099.  The TP is cash basis, so all income is reported thru the bank statement deposits.  

[yeknod]

EIN in on the 1099's not SS#.  

I have had individuals get balance notices because their income was lower than what they reported.

I'm not sure how that works with S-Corp.

[yeknod]

No 1099-K's only 1099-NEC

[Just-Lisa-Now-]

Why is an SCorp getting 1099s?

[yeknod]

They are an insurance company and they give 1099's to all entity types.

[qbteachmt]

Bank deposit date for ACH/EFT is one thing. Those are timely. Bank deposit date when it came in the mail over Christmas and your taxpayer didn't go to the bank or do phone app deposits until back in the office in Jan, isn't cash basis 2025. That banking delay doesn't override that the money came in 2024.

[Winnie5911]

This could be because the received payment by credit card and charged an extra processing fee that the credit card kept and they didn't claim as revenue.  They would then need to make an entry to reduce cash and charge credit card fees.

[BobKamman]

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@yeknod wrote:

EIN in on the 1099's not SS#.  

I have had individuals get balance notices because their income was lower than what they reported.

I'm not sure how that works with S-Corp.

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For many years, IRS did not match K-1s to 1040s.  Then they started doing it on a selective basis -- probably, only for higher incomes.  I haven't seen any examples of matching 1099s to 1120, 1120S or 1065 returns, but they might be doing it, at least on a sample basis.  They probably have a tolerance if the total is less than 10% different from what is shown on the return.  What is important is to report the income correctly, and that might mean using the 1099s as a better method than the bank deposits if some December checks are not deposited until January.  

[qbteachmt]

"using the 1099s as a better method than the bank deposits"

That's only true if every relationship is a business-to-business and if everyone 1099's the S Corp, which as we know, except for certain business service types, you are not required to issue 1099-NEC to S Corps, and it also assumes the total paid would hit the reporting limit of $600 or more. Let's not forget that there is no need to issue a 1099-NEC when paying through a settlement agent (such as, by credit card), as well.