According to IRS instructions, Schedule C businesses who use a CASH method should include revenue on their tax returns based on when the money is received. Near the end of the year payments may be received in the next year, while these payments are included in the prior year's 1099s. E.g. You receive a check (dated in Dec) Jan 3rd 2013 from a customer, you then receive a Y2012-1099 from that customer in Feb 2013 that includes the January check amount. The rules say that you should NOT include that check on your Y2012 return, however, my opinion is that it is generally better to include it in Y2012 especially if not doing so will make your total Sched-C gross income less than what your Y2012
1099s add up to. My reason for this opinion is that I believe that if your 1099s add to more than your what your business declared as Gross Income you may be flagged even though the instructions say it is OK (most people would rather not have the aggravation even though things will be resolved in their favor in the end).Is this true, or are my concerns baseless? Has anyone seen clients get a letter from the IRS regarding missing
1099 business income based on a single year's return?