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1099 Issue

1099 Doesn’t Match Income Received!

Many of our clients report that the 1099 received from the fiscal intermediary is usually higher than the amounts actually received.  This is typical and should not be alarming.  

The reason for this lies in IRS regulations (Subchapter A Section 1.6041-1).   Simply put, these regulations require that the amount on the 1099 be reported at the gross amount that is paid to the provider and not the net.  Therefore, if providers have had any adjustments to the check amount, the two would not be the same.   For example, if a Request for Anticipated Payment (RAP) is paid and subsequently pulled because the final was not timely filed, than the 1099 would report the RAP payment even though the provider netted $0. 

What should providers do to rectify the situation?  We recommend that providers report the 1099 amount on line 1 Gross Sales of the 1120.  The difference between what was received and what was reported on the 1099 should be reported on Line 2 Returns and Allowances.  That way the provider is paying tax on what was actually received (assuming the provider is a cash basis tax payer) and the 1099 will tie to the tax return.