Jessica is a cash basis taxpayer.When Jessica failed to repay a loan,the bank garnished her salary.Each week $40 was withheld from Jessica's salary and paid to the bank.Jessica is not required to include the $40 each week in her gross income because she does not have the ability to pay tax on money she did not receive.

Question

Quizplus · Accepted Answer

Under the cash basis method, income is recognized when it is actually or constructively received. The garnished wages are considered constructively received by Jessica, so they must be included in her gross income.

Jessica Is a Cash Basis Taxpayer