Lost check: Income never received

[Obelix]

Hello,

If I do not receive and thus do not possess a check that would have been taxable income, because the check is presumably lost in the mail, do I have to declare that amount as income?

The check has never arrived, I don't know the amount, and I absolutely never received the money.

I read about the doctrine of "constructive receipt" and suspect that in my case, I have not received anything.

I do not know if a 1099 was reported to the IRS, but I certainly received no check and no 1099.

Could someone please clarify?

Thanks!

[DMarkM1]

No, you do not need to report income that you did not receive and has not been reported on an income document (W2/1099).  According to IRS Publication 538, as extracted below, constructive receipt does not apply.  

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.

Example.

You are a calendar year taxpayer. Your bank credited, and made available, interest to your bank account in December 2021. You did not withdraw it or enter it into your books until 2022. You must include the amount in gross income for 2021, the year you constructively received the interest income.

[Obelix]

Thank you for the response.

What if there has been a 1099 report but I have not received the check?

I conclude from your quoted material that not having the check means I did not constructively receive the money, even if the employer did report the amount I earned to the IRS?

In other words, if I don't actually receive the check and thus do not have access to the money, is it still considered income? Let's assume that the sender did report to the IRS, but I didn't get anything in the mail, or in my account.

Trying to cover my bases.

Thank you!

[JamesG1]

You received a 1099 reporting income paid to you but you did not receive the income.

Your first alternative is to appeal to the issuer of the 1099 asking them to repay the income, or withdraw or cancel the 1099.

If the 1099 will not be withdrawn, you want to report the income because the IRS will be looking for the income to be reported.

If you did not constructively receive the income, you can report a second line on your tax return reversing the income and zeroing out the income.

As an example, follow the steps below to report other income.

• Select Federal from the left side menu.
• Click on Wages & Income.
• Scroll down to Less Common Income.  Click Show more.
• Click Start / Revisit to the right of Miscellaneous income….
• Click Start / Revisit to the right of Other reportable income.
• At the screen Other Taxable Income enter a description of the income.
• Click Add another income item
• Enter the same income amount as a negative number. 

Maintain a record of the transaction should the IRS question the entry at a later time.

[Obelix]

Thanks VERY MUCH for the effort you're putting in to answering my odd questions!

To clarify:

Employer files 1099.

Employer issues check.

Worker never receives check in mail (lost).

Worker never receives 1099.

In this scenario, from what I gather from your answers, there is NO constructive receipt? So nothing to report by worker?

Thank you!!!

[BillM223]

The answer really depends on how likely the issuer is to pay you.

If you believe that the issuer did pay you (mail it), then you should do what James suggested:

"

Your first alternative is to appeal to the issuer of the 1099 asking them to repay the income, or withdraw or cancel the 1099.

If the 1099 will not be withdrawn, you want to report the income because the IRS will be looking for the income to be reported.

"

When you contact the issuer, keep written documentation that you attempted to do so. Do as much commonication as possible in writing.

Only if the issuer says that they have no plans to re-issue the check can you go ahead and not report income that you never got. This is where documentation will be important, because you have to show that you tried to contact the issuer. 

Note that when the issuer mailed you the check, it is considered "delivered", so the onus will be on you to show that you never got it. This is why you have to go the extra mile to show that you tried to get it but the issuer wouldn't co-operate.

[Obelix]

Thank you!