Cash Method of Accounting

When the cash method of accounting is used, income is reported in the tax year it is constructively or actually received, and deductions are claimed in the tax year paid. Constructively received means that the income is available to the taxpayer, regardless of whether it is actually in his possession. Constructively received income includes income credited to an account, income and reinvested by an agent of the taxpayer, a check or other payment received before the end of the year even if not deposited or converted to cash, and income for which the date of receipt is controlled by the taxpayer (for example, income due and payable from an activity owned or controlled by the tax payer who elects to defer receipt).