What happens if a financial institution and qualified retirement plan administrator makes a distribution to you, but you forget to cash the check?
That is the exact situation the IRS recently addressed in Revenue Ruling 2019-19. In the issues presented, the IRS answered if an individual could exclude from their gross income a distribution from a qualified retirement plan if they wailed to cash the distribution check. Concluding that the individual cannot exclude the amount of the designated distribution from their gross income the IRS also reaffirmed the constructive receipt of income doctrine, namely that “[i]ncome although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions.”