I received a check on New Year's Eve in the mail, but it didn't get into the bank until Jan. 2. For purposes of my taxes, was it receive in tax year 2012 even though there's no record of it being deposited until 2013?

Regardless of when payment is deposited, IRS considers a payment income based on when it is dated. If the check is dated 12/31/2012 or earlier, it is income in 2012.

I'm not a tax professional but I think the income is counted the date you received the check and not the date on the check.

It is taxed in the year you receive it. The sender deducts it in the year they mail it. If a check they mail on December 31 is on your 1099 but you didn't get the pay until January you don't have to pay tax on it until the year of receipt. I had that happen to me once and got an inquiry from the IRS about it -- why my stated income didn't equal or exceed my 1099. I wrote back and told them that one check didn't come until January and I would claim that income on the following year. They were satisfied with that and I never heard another word about it.

(And yes, I did declare that check on the next tax return)

The term that the IRS uses is, I think, "constructively received." So, even if you get the check in the mail on Sunday 12/31 when the banks are closed, you still "constructively" received the funds on 12/31 and they are reported as income for that year. The IRS publication on income makes this quite clear.

I learned it's also considered received and taxable if it was in your mail box on December 31, even if you didn't pick up the mail until January 2. It was available to you; it doesn't matter if you picked it up or deposited it until the next year.

If in doubt, declare it based on the date on the check because unless you get your mail every day you won't really know when it got to your mail box.

Paypal and direct deposit makes these issues so much easier.

itsasecret,
I came back to add just what you said! Agreed.

If you are "cash basis," you would not pick up payment until 2013. However, if you bookkeeping is "accrual basis" then you would declare income from the date it was earned.

The following is from IRS Pub. P334-see "Example." [www.irs.gov]

Cash Method

Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. For more information, see Inventories, later.

Income

Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. If you receive property or services, you must include their fair market value in income.

Example.

On December 30, 2011, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2012. You must include the amount of the check in income for 2012.

Constructive receipt. You have constructive receipt of income 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 treated as having received it when your agent received it.

Cubbie...sounds like even cash basis means I was paid in 2012 as well...I actually received the check during that tax year.

Thanks, all, for the answers. I figured it counted for 2012..just wanted to be sure.

Karen,
Yes, you have 2012 income.