Rolando's employer pays year-end bonuses each year on December 31. Rolando, a cash basis taxpayer, would prefer to not pay tax on his bonus this year. So, he leaves town on December 31, 2016 and doesn't pick up his check until January 2, 2017. When should Rolando report his bonus?

Question

Quizplus · Accepted Answer

As a cash basis taxpayer, Rolando must report income when it is constructively received, which means when it is made available to him without restriction. Since the bonus was available on December 31, 2016, he must report it in 2016, regardless of when he actually picks it up.

Rolando's Employer Pays Year-End Bonuses Each Year on December 31