Constructive Receipt

DEFINITION of 'Constructive Receipt'

A tax term mandating that a taxpayer is liable for income, which has not been physically received, but has been credited to the taxpayer's account or otherwise becomes available for him or her to draw upon in the future. Constructive receipt of income prevents taxpayers from deferring tax on income or compensation they have not yet utilized or spent.

BREAKING DOWN 'Constructive Receipt'

The doctrine of constructive receipt applies to employees that use the cash-basis method of accounting. This means that an employee who received a paycheck at the end of one year must report it as income that year, even if he or she didn't deposit the check until after the new year. This doctrine also stipulates that receipt of funds by an agent is considered to be received by the principal at that time as well.

RELATED TERMS
  1. IRS Publication 538

    A document published by the Internal Revenue Service (IRS) that ...
  2. Gross Receipts

    A tax term relating to the total business revenue from services ...
  3. Cash Basis Taxpayer

    A taxpayer who reports income and deductions in the year that ...
  4. Earned Income Credit - EIC

    A tax credit in the United States which benefits certain taxpayers ...
  5. Phase Out

    1. The gradual reduction of a tax credit as a taxpayer approaches ...
  6. Substitute Return

    A tax filing that the IRS will create for a taxpayer in order ...
Related Articles
  1. Personal Finance

    New Tax Rules Target The Top Tax Bracket

    The American Taxpayer Relief Act brings about new tax rules for the wealthy that people such as Warren Buffett have been calling for over the last few years.
  2. Personal Finance

    IRS Asset Seizures: Could It Happen To You?

    If you can't pay your taxes, know that the IRS has many avenues for collecting what you owe.
  3. Personal Finance

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  4. Personal Finance

    Form 9465: Don't Pay Your Back Taxes Without It

    This form can lighten your tax load if you owe Uncle Sam.
  5. Personal Finance

    20 Tax Changes You Need To Know About

    Don't miss out on the tax changes. Here's a list that you need to know about.
  6. Financial Advisor

    Federal Tax Brackets

    Why do we have income tax brackets? What do they do for us? Read this to understand the basics and where to find your own bracket.
  7. Investing

    Personal Income Tax Guide: 6 Overlooked Deductions And Credits

    By Ken ClarkDue to the overwhelming and ever-changing nature of the U.S. tax code, most taxpayers can't name more than the three or four of the most commonly deductible expenditures. Not only ...
  8. Personal Finance

    5 Groups That Don't Pay Taxes

    Now that you've paid your share, find out who didn't have to pay taxes this year.
  9. Retirement

    How Non-Qualified Deferred Compensation Plans Work

    These tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
  10. Investing

    Personal Income Tax Guide: Common Filing Mistakes

    By Ken ClarkNo matter how much tax planning you do, if you screw up the actual process of filing your taxes, the ensuing penalties and time spent cleaning up the mess can quickly wipe out any ...
RELATED FAQS
  1. Is the marginal tax rate a progressive tax?

    Learn how the marginal tax rate is a progressive tax that takes a higher percentage of income tax from high-income earners ... Read Answer >>
  2. Who is eligible to hold a deferred tax asset?

    Find out when U.S. companies are allowed to hold deferred tax assets and report them in the financial statements according ... Read Answer >>
  3. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
  4. Will I get taxed from the sale of my parent's home?

    I bought a home with my sister two years ago. We did this because my parents could not put a house under their name. They ... Read Answer >>
  5. How do I find out what my tax bracket is?

    Learn the information you need to determine what your tax bracket is. Read Answer >>
  6. Who needs to fill out IRS Form Schedule B?

    If you have several investments, there's a good chance you'll need to fill out a IRS Form Schedule B. Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center