Author Topic: When to recognize MISC income?  (Read 456 times)

Michael in ABQ

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When to recognize MISC income?
« on: January 11, 2019, 08:56:52 PM »
I serve in the New Mexico Army National Guard and each month $28 is deducted from my paycheck to cover $400,000 of life insurance. Years ago the state decided to refund these premiums each year, essentially making it free to have the maximum amount of life insurance coverage for service members.

The state has been trying to switch from paper checks in June and December to direct deposit. I think I've submitted a direct deposit form at least 3-4 times in the last few years and somehow it still never gets processed. Today I received paper checks for both of my 2018 reimbursements that I never received. The total is $336 which I normally recognize as 1099-MISC income. So, even though the checks are dated June and December, because I didn't receive them (or cash them) until January. Would I recognize this income in 2018 or 2019?

I'm in the 12% tax bracket, MFJ, and have six kids so either way, will be getting a nice chunk back. However, I converted about $20-25k of 401k to Roth 401k so my income on paper is going to be close to $100k this year.

terran

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Re: When to recognize MISC income?
« Reply #1 on: January 11, 2019, 09:02:50 PM »
Sounds like 2019. You're looking for the term "constructive receipt" which usually happens when you receive the check. If you could have waked in to some office and asked for the checks earlier you would have had constructive receipt then. It's basically when you're the one who has control of when you receive the money.

See https://www.law.cornell.edu/cfr/text/26/1.451-2 for more.

secondcor521

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Re: When to recognize MISC income?
« Reply #2 on: January 11, 2019, 09:43:27 PM »
@terran's answer is correct.

However, if you receive or expect to receive a Form 1099-MISC from them, I would just report it in which ever year they report it.  I think the ease of having all of the data match up in the IRS computers outweighs being technically correct about constructive receipt.

Michael in ABQ

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Re: When to recognize MISC income?
« Reply #3 on: January 12, 2019, 07:11:36 AM »
Yes, the 1099-MISC will almost certainly be for 2018.

Thanks for the responses.

wudged

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Re: When to recognize MISC income?
« Reply #4 on: February 06, 2019, 10:42:02 AM »
Similar issue but completely different question -

I issued an invoice to a customer on 1/2/2019 that covered the period of 12/1-12/31/2018.

The customer decided to date the check 12/31/2018 and is now including it on my 1099-MISC.

The only thing remotely close I can find is this post https://www.dontmesswithtaxes.com/2010/12/constructively-received-income-or-what-tax-year-applies-to-late-year-payments.html which basically says you can file the way you think is appropriate and make a note of it in your tax return, but possibly be prepared for an audit.

Does anybody have any other insight to this?  I couldn't find any documentation from the IRS other than basically "count the income when you received it" which was early January.

terran

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Re: When to recognize MISC income?
« Reply #5 on: February 06, 2019, 10:51:07 AM »
I filed my 2016 taxes with an expense line added to Part IV: Other Expenses of my schedule C that said "Amount not constructively received in 2016" equal to the value of a check that was mailed, but not received in 2016 that I was given a 2016 1099 for.  I added that amount to my schedule C income for 2017. YMMV, but I haven't been audited yet.