Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Constructive Receipt of Income and Examples
Under the cash method, you not only report income in the year it is actually received, you also report income in the year it is constructively received.
Constructive receipt refers to income that you do not have physical possession of but it has been made available to you without restriction. In other words, you have constructive receipt of income when you have control over such income.
Examples of Constructive Receipt
Using an Agent:
An agent is someone you designate or hire to act on your behalf (the principal) for some specific purpose. If you designate an agent to receive funds on your behalf, you are considered to have received the funds on the date the agent receives them.
For example, you authorize an agent to receive a payment on your behalf. You perform services for a client December 1, 2020. You bill the client $300 and you go out of town and won't return until January 7, 2021.
You authorize your friend Bob to act as your agent to receive the payment. Your client is aware of this arrangement. Bob receives the payment December 30, 2020. You deposit the $300 on January 8, 2021.
You must Include the $300 in your 2020 gross income, the tax year Bob received the payment.
Requesting Your Client to Postphone Sending You a Payment:
On December 23, 2020 your client tells you that a $500 payment is ready for you any time you want it. You tell the client to hold off sending it to you until January 5, 2021 (the following tax year).
You must include the $500 in your 2020 gross income, the year it was constructively received. Simply requesting to have your client hold the check does not change the fact that the funds were available to you without restriction, and therefore, constructive receipt of income occurred.
Interest Credited to Your Bank Account:
Interest of $100 is credited to your bank account on December 30, 2020. You withdraw the $100 January 3, 2021. Constuctive receipt took place and you must include the $100 in your 2020 gross income.
Cancellation of debt (referred to as forgiveness of debt):
You owe a creditor $1,000. You don't have the funds to pay the creditor. During December 2020, the creditor cancels the debt because it is deemed uncollectible. The cancellation was not intended as a gift.
You must include the canceled debt of $1,000 in your 2020 gross income. Cancellation of debt is considered constructive receipt of income.
Deferred Payment Contract:
If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment.
For example, you're a farmer who uses the cash method and a calendar tax year sells grain in December 2020 under a bona fide arm's-length contract that calls for payment in 2021. You include the proceeds from the sale in your 2021 gross income since that is the year payment is received.
However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2020 income, regardless of when you actually receive payment.
Direct Payments and Counter-Cyclical Payments
If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid.