Jessica is a cash basis taxpayer. When Jessica failed to repay a loan, the bank garnished her salary. Each week $60 was withheld from Jessica's salary and paid to the bank. Jessica is required to include the $60 each week in her gross income even though it is the creditor that benefits from the income.

Question

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As a cash basis taxpayer, Jessica is required to include income when it is actually or constructively received, even if it is paid directly to someone else. The $60 withheld from her salary is considered income that she received, even though it was paid directly to the bank.

Jessica Is a Cash Basis Taxpayer