1099-MISC shows payment sent in December but not received/deposited until January.

[yfegade]

This kind of question has been asked many times - My client sent me a check in December, but I don't deposit it in until January. That payment is included in 1099-MISC. Since I run my business on cash basis, how am I supposed to report this particular payment.

All answers suggest that in such cases IRS's definition of "constructively received" should be used.... which states (per IRS Publication 538) "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. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations."

My questions are:

1. In my case, when my client mailed me a check in December, I was out of the country and had my mail on hold. I deposited that check when returned after New Year. I don't even know if that particular check was in-fact received in my hold mail in 2019. In this case, is that payment considered to be "constructively received"?
2. If that payment is not considered to be "constructively received", then how do I reconcile 1099-MISC that my client mailed me (which includes that payment) with reported revenue on my business tax return?

[DavidS127]

Yes, you constructively received the payment if it was in your mail at the end of 2019.  The fact that your mail was on hold does not change the fact that the check was available to you.

[yfegade]

But I don't know for the fact that it was in my hold mail at end of 2019. I picked up my hold mail on 10th January when I returned. My mail was on hold from 15th of December till 10th of January!

I have no way of finding out if that particular check arrived in my hold mail in 2019 or 2020!

[ColeenD3]

Your best bet is to find out exactly when the check was mailed and giving it a reasonable few days to get to you, determine when it arrived.

[yfegade]

I called my client. They said, they printed the check on 23rd December, but due to holidays, it may have been signed and mailed on 26th or 27th...

This puts delivery right at the boundary of end of 2019 and start of 2020.

[ColeenD3]

Use your best judgement. There is no way to know for sure.

[yfegade]

If I decide to account that income in 2020 taxes (best matches with my bank records), then how do I reconcile 1099-MISC on my business taxes?

Is there a way to include entire figure from 1099-MISC (which includes this payment), but take a credit for this check amount while reporting revenue on my business tax form?

[RobertG · Accepted solution]

Yes, you could report the amount as income and take an equal amount as an expense, as long as you report the income on your 2020 return.  

You have a strong circumstantial argument that the income was not constructively received by you in 2020.