Publication 525 |
2001 Tax Year |
Introduction
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 specific subject.
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.
Example.
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.
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 services.
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can e-mail us while visiting our web site at www.irs.gov.
You can write to us at the following address:
Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in
your correspondence.
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