So here is a situation I had in 2023.
I received a paycheck from the IRS, which included a return, interest on it, and an overpayment IRS did.
So I followed instructions on the topic of Errornos Check, voided it, and sent it back to the IRS with an explanation. 4 months after that they confirmed that they received it. I assume it arrived in a week and they spent almost 4 months processing it.
This year IRS sent me 1099-INT form.
So I read Pub 550 and Pub 538 and it's there a definition of "Constructive receipt" in both publications.
So the first publication - is about interest and the second - is about income regarding the cash method.
Plus in 538 I can see a special tip, saying
"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. "
So looking at both definitions I came to conclusions:
- There cannot be two different definitions of the "Constructive receipt" term depending on the case. So they are both legit just the second one is a bit concrete compared to the first and has an example related to my case.
- As there are examples of uncashed checks that cannot be used to postpone income, then it means that it's the nature of the check, to commit receiving. It's just not allowed to be used in that case.
- I have exactly that situation in the tip with the difference that I returned it to the IRS per instruction and I didn't postpone anything intentionally for that specific purpose.
- I was unable to cash part of the check ie interest only cos in this case I would take overpayment as well.
So for me, it looks like I do not need to add 1099-INT for the 2023 return, but are there any thoughts about it?
Are there any options for 1099-INT if I'm on the standard deduction to report it but do not have it taxed, so I will tax it in a year when I finally receive it and cash it?
