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h2oman
Jan 19, 2022 8:52 PM UTC
Solved

1099 nec

1099 nec received does not agree with actual amount received - due to invoice being paid end of December 2021 and not deposited until January 2022.   How is that reported to IRS and adjusted on QB?

BigRedConsulting
BigRedConsultingAnswer
Jan 20, 2022 5:00 PM UTC

If you sent a payment early for a bill that is an expense to you in January, then it's not an expense until January, whether on a accrual or cash basis. It's like a prepayment or deposit on account. Not an expense, but an asset until it is used. That's the accounting view.

 

However, that's not how 1099 reporting works. Instead, it's based on the payments you made to the recipient, regardless of whether or not they earned the payments in the tax year.

 

The two don't have to agree. It's not important to make your business expenses match the cash payments to your vendors for the different tax reporting, if for no other reason that not all payments to vendors are allowable business tax deductions/expenses.  But also because the different types of reporting are asking for different things.

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3 replies

BigRedConsulting
BigRedConsulting
Jan 19, 2022 9:25 PM UTC

If the payment actually pays the A/P bill, the amount should appear on the 1099.  At least, that is the way it is designed to work.

 

If it doesn't, the easiest way to fix it is to delete the payment and then pay the bill using Pay Bills.  Be sure to set the payment date to the original last year when you do this. It should than show up on the 1099.

h2omanAuthor
Jan 19, 2022 9:55 PM UTC

Thanks for quick reply. I had no problem with the actual December payment being included on the 1099.

 

The problem arises when the check wasn't deposited until January 2022- thus not showing as income for tax purposes in 2021.  [The 1099 includes that December payment BUT QB doesn't show as income as it wasn't received and deposited until January.]  Is there a way on QB to reconcile the difference so that it doesn't raise a red flag on the Income Tax return? 

 

BigRedConsulting
BigRedConsultingAnswer
Jan 20, 2022 5:00 PM UTC

If you sent a payment early for a bill that is an expense to you in January, then it's not an expense until January, whether on a accrual or cash basis. It's like a prepayment or deposit on account. Not an expense, but an asset until it is used. That's the accounting view.

 

However, that's not how 1099 reporting works. Instead, it's based on the payments you made to the recipient, regardless of whether or not they earned the payments in the tax year.

 

The two don't have to agree. It's not important to make your business expenses match the cash payments to your vendors for the different tax reporting, if for no other reason that not all payments to vendors are allowable business tax deductions/expenses.  But also because the different types of reporting are asking for different things.

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