Constructive Receipt

Constructive Receipt refers to a tax principle that determines when income is considered received by a taxpayer, even if the funds are not physically in their possession. This occurs when a taxpayer has control over the income and it is available to them without restriction.

For example, if an employer issues a paycheck on December 30, and the employee does not cash it until January 5 of the following year, the income is still considered received in the tax year it was issued (December) under the principle of constructive receipt. This means the taxpayer must report the income for the year it was made available, even if they have not physically received the cash.