As a small business with cash accounting, I completed a job for a client in 2011 but did not receive and cash a check until 2012. However, the client mailed a check in 2011 and will be sending me a 1099 including the payment in 2011. Which do I go by for gross income on my schedule C, my cash records or the 1099? I ask because it was a relatively large amount, and the difference should be noticeable to the IRS. Thanks!
I would include the income on your 2011 return if it's included in the 1099. You could argue tha you didn't receive it until 2012, so it shouldn't be income until then. But, if you don't put it on your 2011 returns and the IRS challenges it, you would have to spend either time or money arguing with the IRS, which would more than wipe out any benefits of waiting until 2012 to report the income.
Thanks for your thoughts. I don't disagree with you since I do not want to mess with the IRS. Thanks!
As said in the above post. Include this as your income in 2011, as client mailed the check in 2011, and you received the check in 2011. (even you cashed/deposited in 2012. He is also issueing you 1099.
Thanks for your thoughts. The problem is that I didn't receive or cash the check until 2012. Does this change your advice. Thanks!
Technically you may take that road to report in 2012. But you received 1099 for this. So its good idea to report in 2011.
As you said, you don't want IRS knock your door, and then you will explain them this situation, and may be end up explaining more stuff. SO just report it to be on safe side.
