What if the Jan rent check arrives in Jan but the 1099 takes it into account?

I have some small office property rentals that are organized under different LLCs.
I use the cash method of accounting.
I received the rental check for Jan 2020 in Jan 2020. However the company issued the check in Dec of 2019 (dated in Dec 2019) and added it to their 1099 that they sent me for 2019.
So my income for 2019 is less than what the Company's 1099 for 2019 says.
What should I do in this case?
Reply to
Jessie
I am not a tax professional, just a taxpayer. My advice is to keep it simple and just use your management company's figures in this case. Your total taxes for 2019 and 2020 will be the same either way, so does it really matter much if you pay a part of them earlier?
Here's what I found at
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"Report rental income on your return for the year you actually or constructively receive it, if you are a cash basis taxpayer. ... For more information about when you constructively receive income, see Publication 538."
And from Pub. 538:
"Constructive receipt. "Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. ..."
That sure looks to me like you should count that income in 2019.
As a matter of practicality, remember that the IRS has that 1099, and its computers will match up amounts. Even if the law is on your side (which it may very well not be), is it worth your time and effort to attach a statement to your return this year explaining why the 1099 is too high, and then remembering to attach anther statement to your return next year explaining why that one is too low? Aside from the possibility of inviting an audit,(*) you complicate your own accounting without actually saving any money. At current interest rates the float on the money is not really significant, and you don't even need to pay 2019's income tax till July 2020.
(*) "The IRS monitors tax returns with Schedule E more closely than those without it."
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Reply to
Stan Brown
I have done so in the past. And I have done the opposite in the past.
Your total taxes for 2019 and 2020 will be the same either
You don't know this for a fact.
He received the check in January. He did not constructively receive it in December.
I believe the law says this to be treated as 2020 income.
is it worth your time
I have not bothered to do so in the past, no problems resulted.
Aside from the possibility of inviting an
The audit will be a letter audit, not a huge problem to reply to.
you complicate your own accounting
Not really
without actually
You don't know that to be a fact.
At current interest rates the float on the money
Bottom line: do as you wish. If you put it in 2019 income, the IRS won't question it. If you put it in 2020 income, the IRS is not guaranteed to question it, and if it does, you have an answer which is completely satisfactory under the law.
Reply to
Taxed and Spent

Assuming that you actually received it in 2020 and didn't just wait to pick it up in your mailbox when you could have gotten it in 2019, then it's 2020 income to you, but a 2019 deduction for the people who paid you.
The first thing you should do is to keep the envelope you received payment in (or however you received it) so you can document when it was actually received. Then treat the income as 2020 income, and be prepared to show your proof to the IRS if they come knocking.
Reply to
Stuart O. Bronstein
I agree with Stan. All due respect, a 1099 mismatch is an invitation to an audit, which, if nothing else, may be time consuming. Why invite that?
To your last point, if the difference from 19/20 is significant, that's a choice OP needs to make. I've learned over the years not to be dismissive over what I think is a small sum (say $100) that required a lot of effort to capture (a year's worth of accumulated medical receipts). In my opinion, that becomes the choice, $XX vs YY risk. Keep in mind, the IRS, at audit time, may just demand that OP follow the dates the 1099 stated. The success is not a given.
Reply to
JoeTaxpayer

Thanks Joe. Reality and pragmatism is more important than theory. Under the law OP should recognize the income in 2020. However if there's a significant chance for audit and that an auditor may require that it be recognized in 2019, discretion is the greater part of valor.
Reply to
Stuart O. Bronstein
Given that this happens all the time, how significant is the chance of an audit? How significant is it that the audit will be dealt with simply and efficiently, with no change?
Reply to
Taxed and Spent
I agree with Mr. Bronstein about what you should do (income received by a cash basis taxpayer in 2020 is 2020 income even if the 1099 for 2019 says otherwise - but document the situation the best you can).
My belief is any resulting 1099 mismatch is very unlikely to cause you problems. Income and Expense timing issues during the end of year between businesses have existed for eons. If the IRS was to follow up on off-by-one month 1099 mismatches they would spend a lot of resources and find many false positives (both businesses handled thing correctly), the actual mistakes would average no net revenue, and they would piss off a lot of people in the politically influential small business community. The IRS simply doesn't have the excess resources to waste on activities that unproductive. An annoying number of renters get behind in rent and pay multiple months in late December as much to get the deduction as to get you off their case. I suspect the actual IRS 1099 mismatch algorithm has learned to tolerate much larger mismatches than just off by one month - probably more like off by 3 or 4 months. If you have other audit triggers in your returns, the mismatch may be enough to push you over the audit threshold but I just don't see it as being much of a problem on it's own.
If you do hear from the IRS about this problem, there is a good chance they are looking more at your renter than you. Respond to the IRS with a letter telling them what you told us. Unless your renter can prove they mailed you the check in 2019, they may end up with a 2020 deduction. If the renter can show the check was mailed but it was late in the month, that can also support your contention you didn't receive payment until 2020. After all this time and effort, the IRS will on average receive $0 more in revenue - it is hard to see them pursuing this very hard.
Reply to
BignTall

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