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Scenario

Let's say I was given a check from an LLC on December 15 that was written to my LLC on that same day, and I cash it on January 15 the following year.

Question

Will I have to claim the income for the origin year or the origin year +1? eg. 2017/2018

This question has been answered which prompted a more detailed version which can ve seen here for a more detailed version of the same question.

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    Is this a paycheck from your employer, or a check for your business from a customer?
    – Ben Miller
    Commented Nov 30, 2017 at 1:26
  • @BenMiller Good question, let's say it's from a client LLC to a sole-proprietor LLC which I own.
    – Jacksonkr
    Commented Nov 30, 2017 at 1:28
  • When you say "given", do you mean that you have the check actually in your possession (or somewhere that you can access it at will)?
    – chrylis -cautiouslyoptimistic-
    Commented Nov 30, 2017 at 15:17
  • @chrylis As to not add any additional details to this question, I've posted a follow up question with more details here
    – Jacksonkr
    Commented Nov 30, 2017 at 18:31
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    One problem with all the answers. The Post Office is a delivery AGENT, but for which party? If the recipient instructed the check to be mailed, then the Post Office (or other carrier) is an agent for the recipient. When the recipient's agent gets possession (deposited in a mailbox, postmarked), then the recipient has received it by agency.
    – George West
    Commented Dec 10, 2022 at 0:31

1 Answer 1

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If your business operates on a cash basis (and it probably does), then income is governed by a doctrine known as constructive receipt. From IRS Pub 538:

Constructive receipt. Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations....

You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. You must report the income in the year the property is received or made available to you without restriction.

In the case of a check, you have constructive receipt of the check when you receive it, not when you cash it or deposit it. In your example, the income would belong to tax year 2017.

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    @Jacksonkr You theoretically have access to the PO Box every day, right? The check has been "made available to you without restrictions," and leaving it in the PO Box won't change that. Having someone else retrieve the mail won't change it, either, as that would be "you authoriz[ing] someone to be your agent and receive income for you."
    – Ben Miller
    Commented Nov 30, 2017 at 3:51
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    @Jacksonkr, Rather than adding that information to this question, I'd suggest a new question with that specific information & make the new question explicitly about that. This question could be canonical for check date/constructive receipt (an important concept). Making that edit would A) partially invalidate this answer (generally against policy), & B) make the question more specific/less useful to others. Having an additional question which covers the specific case (e.g. being 1600 miles away/unable to receive the check), in addition to this one, would be beneficial to future readers.
    – Makyen
    Commented Nov 30, 2017 at 7:35
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    @Jacksonkr and everyone else: The 1600 miles is completely irrelevant to the IRS. It is the OP's choice to use a PO Box so far away from where he lives. There are obvious solutions to his dilemma (use a different PO Box, have someone check the box more often and mail the check, move closer, etc). Even if he does none of these and doesn't get the check until mid Jan, it's still not a big deal, as he probably won't have filed his 2017 taxes yet. I would not recommend writing a new question just for this.
    – Ben Miller
    Commented Nov 30, 2017 at 11:35
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    @BenMiller : Presumably if the customer mails the check on 2017-12-20 and it gets stuck in the Christmas rush so that it isn't delivered until 2018-01-05, then the IRS will be entirely happy with the income being constructively received in 2018? (Which also means the income would be received in the month after the customer reports spending it.)
    – Martin Bonner supports Monica
    Commented Nov 30, 2017 at 15:30
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    There was a case where a lottery winner could have picked up his winnings on 12/31, but didn't want to drive to the office that day, so he waited until January. He tried to argue with the IRS that he hadn't received the money until he picked it up. The IRS ruled that he could have driven in Dec. if he wanted to, he just chose not to, so he had constructively received the winnings in the earlier tax year. In that case the taxpayer didn't even have the choice of where the lottery office was located, unlike the OP who chose to locate the PO box 1600 miles away.
    – stannius
    Commented Nov 30, 2017 at 17:18

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