You can receive income in the form of money, property, or services.
This publication discusses many kinds of income and explains whether
they are taxable or nontaxable. It includes discussions on employee
wages and fringe benefits, and income from bartering, partnerships, S
corporations, and royalties. It also includes information on
disability pensions, life insurance proceeds, and welfare and other
public assistance benefits. Check the index for the location of a
Generally, income is taxable unless it is specifically exempted by
law. Income that is taxable must be reported on your return and is
subject to tax. Income that is nontaxable may have to be shown on your
tax return, but is not subject to tax.
Constructively received income.
You are generally
taxed on income that is available to you, regardless of whether it is
actually in your possession.
A valid check that you received or that was made available to you
before the end of the tax year is considered income constructively
received in that year, even if you do not cash the check or deposit it
to your account until the next year. For example, if the postal
service tries to deliver a check to you on the last day of the tax
year but you are not at home to receive it, you must include the
amount in your income for that tax year. If the check was mailed so
that it could not possibly reach you until after the end of the tax
year, and you could not otherwise get the funds before the end of the
year, you include the amount in your income for the next tax year.
Income received by an agent for you is income you constructively
received in the year the agent received it. If you agree by contract
that a third party is to receive income for you, you must include the
amount in income when the third party receives it.
You and your employer agree that part of your salary is to be paid
directly to your former spouse. You must include that amount in income
when your former spouse receives it.
Prepaid income such as
compensation for future services, is generally included in your income
in the year you receive it. However, if you use an accrual method of
accounting, you can defer prepaid income you receive for services to
be performed before the end of the next tax year. In this case, you
include the payment in your income as you earn it by performing the
Comments and suggestions.
We welcome your comments about this publication and your
suggestions for future editions.
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You can write to us at the following address:
Internal Revenue Service
Technical Publications Branch
1111 Constitution Ave. NW
Washington, DC 20224
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helpful if you would include your daytime phone number, including the
area code, in your correspondence.