IRS Says These Non-Cash Items Are… Cash

At tax time, it’s easy to remember your wages, since you receive a Form W-2. It’s also easy to remember income reported on Forms 1099, though if you are missing one, consider keeping quiet! You probably get forms 1099, but you might forget some items like these. A variety of events can give you taxable income even though you’ve seen no cash. Here are some common ones:

Constructive Receipt

Constructive receipt requires you to pay tax when you merely have a right to payment even though you do not actually receive it. If you have a legal right to a payment but elect not to receive it, the IRS can still tax you. The classic example of constructive receipt is a bonus check. Suppose your employer tries to hand it to you at year end, but you insist you’d rather receive it in January, thinking you can postpone the taxes.

Wrong. Because you had the right to receive it in December, it is taxable then, even though you might not actually pick it up until January. On the other hand, if your company actually agrees to delay the payment (and actually pays it to you and reports it on its own taxes as paid in January) you would probably be successful in putting off recognition of the income until the next year. Yet even in this circumstance, the IRS might contend you had the right to receive it in the earlier year.

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