How should I handle this?

[sofadoc]

Back in November, I gave an estimate for a large job at a local business. The lady in charge wanted me to go ahead and bill them, so she could write it off on the 2010 budget (even though she didn't want the work to be done until after the first of the year).
I sent them a bill.
In January, I got a 1099-misc form  from the business for the work that I haven't done yet.
Now, the lady is avoiding my calls.
IMO, it's too late to back out on the deal now, since I've been issued a 1099 that I have to report on my income tax. The way I see it, if there's a 1099 with my name on it, then somewhere there's a check with my name on it.
I hate to jeopordize the whole thing by going over her head. Taking legal action would be expensive, and kill a relationship that has been quite profitable for me over the years. This has to be handled delicately. Any suggestions?

[hdflame]

Boy, I bet you didn't see that one coming!

This person obviously has underhanded intentions or they wouldn't be avoiding your calls.

First thing I'd do is ask the person who prepares your taxes for some advice.

Second thing, after I got the advice, I'd pay her a personal visit in order to "schedule" a date for the work to be done!

I would think that it would be obvious to an auditor that you hadn't been paid for the job, but it would also be obvious that you took part in a plan to defraud the IRS....however unknowingly to some extent.  You have to be very careful about bringing attention to yourself, but so do they!  I wonder if they did this to anyone else??

Keep us posted and good luck.

[Mike8560]

Did they get a paid reciet?

[sofadoc]

As long as I report the 1099 on my income tax (which I already have), then I don't see any wrongdoing on my part.
I don't think that the lady has any underhanded intentions, I just think she has simply had second thoughts about getting the work done. I'm sure there's some legal way to void the 1099, if it comes to that. I don't mind losing the job, but I don't want to pay income tax on money that I didn't receive. When she allocated money from the 2010 budget, I don't think she was thinking about a 1099 being issued.
I don't see any defrauding going on. After all, they reported the 1099 to the I.R.S., and so did I. They have to either pay me, or void the 1099.
If nothing else, I can insist that they issue me a check, then I can refund it to them, and take it off next years taxes.
I just don't want to do it in a way that will cause hard feelings. They've been a very good customer over the years.
I only sent them an invoice. I have not given them a receipt, since I haven't received any money, or performed any work.

[hdflame]

It sounded to me like they were looking for some additional tax write offs for 2010  without actually spending the money until 2011.  Don't know if that would be considered wrong doing by the IRS, I'm definitely no tax expert.  Maybe there was no intent of wrong doing at the beginning, but by her avoiding your phone calls it sounds like she's having second thoughts now.  At the least, not very good business practice on her part.

Hope it works out for you.  They shouldn't have any bad feelings toward you.  You've only tried to help them out in good faith.

[ajlelectronics]

I appreciate that I know nothing whatever about your tax system and it does sound quite different to the UK.

Purely for your interest, to deal with an issue like that, all I would have to do is issue a credit note against the invoice raised.

[Mike8560]

I thi k I'd simply
and nicley ask to have the 1099 voided I'd they can't do the job now.   
Perhaps she wants more time to get it done?
Time are tough for everyone.

[baileyuph]

You do not have a choice.

You have to file an accurate tax return that will pass audit.  To do that, since you implied that you have already filed, simply file a corrected copy.  One that does not claim receiving the money.

You have a problem with the tax return already submitted.  You can't prove you received the money, even if you do the job today or later.  That still remains a problem for you and will forever.

Send the corrected tax return.  Advice from a tax lawyer in preparing the corrected copy is essential, or at a minimum, work with an certified  tax person in preparing the corrected copy. 

Send the customer registered mail with delivery reciept coming back you, of your plan.  That best clears you and shows good intent with the government.  It is up to the customer to clear her own return by filing a corrected copy also.

Doyle

[gene]

1. You billed a company for work that you did not do. Never a good idea. Yes, hind sight is 20/20.

She got the benefit of a nice tax write-off and you got the worry.

"I cannot bill you for work that I did not do. My company policy, my accountant, my business adviser, my whoever, will not allow that. My payment terms are 1/2 of the amount due paid at the beginning of the job and the remainder due upon completion of the job." Or whatever your company policy is. Here's a good reason to have company policies, in writing.

2. Her company is probably on an accrual basis for accounting. She credits at the time the bill is received, or accrued, not when it is paid. I don't see her doing anything improper - just a bit unusual.

Her company is also probably having cash flow problems if she is asking folks to bill her in 2010 for work that won't be done in 2011. Or, she may be bringing in so much money that she is looking for tax write-offs to help offset her tax liability. Either way, I would not appreciate being asked to do this.

There are still 10 months and a few days left in 2011. I think you may be jumping the gun a bit. Don't worry. Be happy. And file an amended 2010 tax return in 2012 if you never do the work.

Doyle is correct in that your books will show an accounts receivable not paid. I don't think the IRS will mind you paying taxes on money you did not receive. They get a bit testy when it's the other way around.

Good luck on getting a handle on this.

gene

[JuneC]

Doyle is dead on.  IMHO, your customer needs to file an amended 1099/1096 and you need to file an amended return.  The tricky part is that amendments need a note explaining why it was incorrect in the first place.  Your explanation is easy - your bookkeeping is sloppy and you overlooked the fact that you hadn't actually received any payment yet.  Hers is not so easy.  I'm pretty sure 1099's are issued for monies paid, NOT "accounts payable". 

I appreciate that you're trying to retain good relations with this long-standing customer, but what she's done is shift part of her 2010 tax bill to you with no benefit.  What it amounts to, is you've made her a no-interest loan for the amount of the tax you're paying, up until the time you either receive your check, or she files an amended 1099/1096.  Very tricky situation you're in.  Anyhoo, consult your tax advisor for your next move, for sure. 

June

[Joys Shop]

They are all correct
Consult your tax advisor

1099s are issued for money paid, not for Accounts payable
This company is trying to do something very underhanded, and can get in trouble with the IRS

If you do the work for them, they might try to claim they already paid you for it