Tax implications of 1099 income across year boundary

Question

I did some consulting work for a former employer during CY 2014. I did it in two batches (A and B, say), one in September and one in November. They were for separate sections of the company, so they were invoiced separately to different people.

Fast forward to today. I was paid for the larger amount - the second batch - in December, and clearly that belongs in 2014. I discovered today that I was paid the same larger amount a second time (by ACH into my larger, not-daily-use, account, which is why I didn't realize it immediately), also in December 2014. I have not, on the other hand, been paid the smaller amount.

I clearly need to repay at least the difference (B-A), but I'm concerned about tax implications. I'm almost certainly moving up a tax bracket this year (2015) (both due to additional consulting work and a significant raise in the new job), so I'd like to if possible keep the income for both jobs in 2014.

If I repay the entire amount and then am separately paid for the smaller job in 2015, does this move the income into 2015? If I instead only repay the difference of the two, does that allow me to keep the income in 2014? Or does the income stay in 2014 regardless since the work was done in that time? Am I correct in believing the second payment does not need to be reported as income, given it was an error and I intend to repay it (and will early this year)?

And finally, given I'm expected to do enough work to make up the difference in CY2015, if they give me the option to just work off the difference [which may simplify things on their side], does this have an impact - would the entire amount be taxable in 2014 as a result, or would only the 'correct' amount belong there?

The amount isn't terribly large - single digit thousands - if that is relevant. It's 1099, so I'll be paying employer-side taxes on it, if the answer is not the same between FICA and 1040 taxes, but it's personal income (I don't have a corporation).

Answer 1

Short answer: the company will give you a 2014 1099 form with the amounts paid, so make sure your tax return matches.

Longer answer: contact their HR department and alert them of the overpayment, and ask if it's ok for you to reimburse them for the difference due (and then you'll be paid in full). Let them know you want to do this so all the income will be reported in 2014, and ask that they double-check their 1099s before sending them out and reporting to make sure the error was handled properly.

Paying them back in 2015 is fine, that shouldn't make a difference to them. You could ask them if it helps them if you date the check 12/31/2014.