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 31,2013 and doesn't pick up his check until January 2^nd,2014.When should Rolando report his bonus?

Question

Quizplus · Accepted Answer

Since Rolando is a cash basis taxpayer, income must be reported in the year in which it is actually or constructively received. Even though he didn't pick up his bonus until January 2014, he had the right to receive it on December 31, 2013, which means it was constructively received in 2013 and must be reported on his 2013 tax return.

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