Where Are All My 1099 Forms?

Here I am, trying to start on my taxes but wondering why only half of my clients sent me a 1099-MISC this year! It turns out that businesses do not have to send a 1099-MISC to corporations no matter how much money they paid them. My business is an S-Corporation, so instead of having nice printed forms that clearly show how much they paid me in 2006, I get… nothing. I still have my own accounting books, but I have found in the past that my records and my client’s records aren’t always in sync.

For example, I might do a job in November, send the invoice in December, their check is written in late December but I don’t receive and deposit it until early January. Is this income for 2006 or 2007? Since I am on a cash basis, I would usually say 2007. But they may say December. If they give me a 1099 saying it counts for December 2006, I would just put it down for 2006 to avoid any conflicts and potential IRS red flags.

Upon reading up on this is some tax forums, I actually found that many people see this as a good thing for corporations. Because a 1099 isn’t generated, there is less of a paper trail to disprove whatever one decides to put down on their tax returns. Generating a 1099 when one isn’t required is almost akin to tattling. Still, I miss being able to cross-check my records.

Time to file a tax extension!

Comments

  1. Following accounting principles, you report income during the period it is earned. Same with expenses. Just like you would pay for expenses using a credit card and settle the balance with the credit card company later. Would you expense on the day you pay your credit card statement?

  2. typically your deposits exceed most 1099s issue to your company. Why would you want to rely on your customers to reassure you that your reporting what your supposed to.
    Since your on the cash basis, all you need to make sure is that all of your banking deposits are recorded as sales. Unless you can prove that they are non-sales such as loans or refunds from the phone company etc..

    A lot of companies defer bank deposits until January so they can defer paying tax for another year. 1099s are due by 2/28/07, so i can assure you that your not going to get anymore!

  3. Ssembonge – The difference comes from the two types of accounting methods – cash vs. accrual accounting

    Using cash-basis accounting, income and expenses are recognized only when cash is received or paid out.

    Using accrual-basis accounting, receivables and payables are recognized when a sale is agreed to, even though as yet, no cash has been received or paid out.


    I’m not relying on them, but it makes is possible for me to point out errors in their numbers and avoid any potential audits. Amertrade has already sent me two corrected 1099s this year, much later than 2/28.

    I still have my own books, but it’s weird that if I was still a sole proprietor or LLC, I would still be getting these forms.

  4. All I can do it sit here and chuckle at you. I’ve said it probably 5 times before and I’ll say it again… Quicken….

  5. “If they give me a 1099 saying it counts for December 2006, I would just put it down for 2006 to avoid any conflicts and potential IRS red flags.”

    Man, you would rather pay the ’06 tax instead of deferring it (totally legally) to 2007 taxes? It’s completely legit to pay taxes on income earned on the cash basis.

  6. Independent George says:

    Cash vs. accrual is irrelevant in the long run (it’s all the same money), but the most important thing is (1) to be consistent, and (2) keep a paper trail. If you’ve historically treated it as year-end income, then deviating from that pattern makes it look like you’re trying to manipulate the books.

    Also, if your client’s check is dated in December ’06, you probably want your own records to match theirs. Short of a signed/barcoded FedEx receipt, there’s really no way to prove that you received the payment in January (especially if you didn’t issue an invoice for late payment). If you’re on cash basis, and payment was due in ’06, and the client says (and can prove) they paid in ’06, then it’s safest to treat it as ’06 income.

  7. mmmm…cash….why would one declare it ;)

  8. Although you may be on the cash method; you need to watch out for constructive receipt of income. If you have constructive receipt of income, it is income at that time. Without going into too much detail, generally you have constructive receipt of the money when you have control over when you receive the money. For example, let’s say you provide services in December and the client asks if you want him to pay you now and you say that you’ll send him an invoice and you ultimately don’t receive payment until January. Even though you are on a cash basis, that money would be taxable as if received in December.

    Also, for 1099s, the issuers of the 1099s have the option to not issue 1099s if the amounts are below $600. You’re still supposed to include the amounts into income; the payors just have the option not to issue.

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