Last year I did not report 7K or 1099-Misc earnings, as the earnings were in 2007, and the company that gave me the 1099 counted them in
2006. I adjusted, and am counting this 7k in earnings in 2007. Was that a no-no? Should I have asked for a new 1099 instead? The IRS sent a not saying I owe the ~2K in taxes now and $115 in interest. I'm thinking I should just pay it and be done, since the cost is only $115. Does agreeing with their judgment hurt me in any way?-beckkl
"beckkl" wrote
As a cash basis taxpayer (which you most likely are), your income is correctly reported in the year received. If you received it in 2007, then report it in 2007.
Your customer - probably a cash basis taxpayer, and wanting to show the expense in 2006 - dated the check for 2006 and issued you a 1099 accordingly.
Tell the IRS the money was received IN 2007 (attach a copy of the deposit slip, and/or get a copy of the deposit from the bank as supporting documentation) and that you correctly reported the income in the year in which you received it.
They should leave you alone after that.
Unfortunately this happens all too often.
No, assuming your contention that it was 2007 income is valid.
No, assuming the company's 2006 designation was valid. For example, the company mails a payment December 31, 2006. It's a 2006 payment from the company's perspective. You don't receive the payment until 1/2/2007. It's
2007 income from your perspective.
You mean other than costing you $115 you don't owe and maybe giving the IRS computers the idea that you're a little lax with your income reporting rather than doing things right?
Can't think of anything.
Myself, I'd write back explaining why it's 2007 income.
The last time I had that sort of problem, I called the IRS (at the phone number shown on their notice) and, over the telephone, explained the facts regarding when I had constructive receipt of the funds.
The person I spoke with took care of everything over the phone, and there were no further repercussions.
--ron
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