1. The payer dated the check Dec. 31, 2007--I received it on Jan. 3, 2008.

2. The 1099M I received from him for 2007 includes the amount received in 2008.

I am planning on using that income as 2008 income. How do I properly report the lesser amount on the 2007 tax forms?

That is, received $5,000 on Jan. 3.
1099M states $8,000 for 2007.
$8,000 - $5,000 = $3,000 received in 2007, and reportable in 2007.

Am I correct that since I received it in 2008, it is 2008 income, even though the 1099M from the payer says he paid it in 2007? Thanks.