Constructive receipt doctrine and ACH bank transfer rules for 2025 taxes

The constructive receipt doctrine is pretty clear in your situation, but people often misunderstand it. For check payments, the general rule is that the deduction is allowed in the year the check is delivered or mailed, as long as it's eventually cashed in due course. This is known as the "mailbox rule" for tax purposes. For you as the payer, you can claim the deduction in 2023 because that's when you delivered the check, regardless of when it actually cleared your account. The fact that there were ACH delays between your accounts doesn't affect when you can take the deduction. For the contractor receiving the payment, they should report the income in the year they received the check (2023), not when they deposited it or when it cleared. Under constructive receipt doctrine, income is considered received when it's made available without substantial limitations - which happens when they physically receive the check. The ACH transfer between your accounts is basically irrelevant to the tax timing question. The important date is when the check changed hands.

After struggling with a similar issue involving payment timing and constructive receipt, I discovered this AI tool that specifically analyzes tax documents and situations like yours. I used https://taxr.ai when I had confusion about some contractor payments that crossed tax years, and it saved me hours of research. The tool analyzed my bank statements and payment records, then cited the specific IRS regulations that applied to my situation. What was helpful is that it explained the constructive receipt doctrine in plain language and gave me documentation I could rely on if questioned. They have a feature specifically for analyzing payment timing issues across tax years that might help clarify your situation with the ACH transfers and check clearing dates.

I was skeptical about taxr.ai too, but I finally tried it when I had a similar issue with payments crossing tax years. I uploaded my bank statements showing transfers between accounts and check payments, and I was honestly impressed. The tool quickly identified the transactions that crossed from December into January and applied the constructive receipt doctrine correctly. It explained that even though my check didn't clear until January 6th, I could take the deduction in the previous tax year because I delivered the check on December 29th and had sufficient funds available despite a pending ACH transfer. It even generated a document explaining the tax treatment with citations to Treasury Regulations that I could keep with my tax records in case of an audit. Saved me from making a mistake and potentially missing out on deductions in the right year.

If you're having trouble getting a straight answer about this constructive receipt issue, you might want to call the IRS directly. I know that sounds awful, but I used https://claimyr.com and it completely changed my experience. I had been trying to reach someone at the IRS about a similar timing issue for weeks without success. This service actually holds your place in line with the IRS and calls you when an agent is about to answer. I was super frustrated trying to figure out the rules about when a payment is considered "made" for tax purposes, and I needed an official answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that for cash basis taxpayers, it's when the check is delivered that counts, not when it clears - as long as you had the funds available to honor the check when presented.

OK so I was the skeptic about Claimyr but I have to admit I tried it yesterday and it actually worked. I was preparing some documents for my 2024 taxes (filing in 2025) and had a similar question about when a payment is considered "made" for tax purposes. I used the service and instead of waiting on hold for 2+ hours, I got a call back when an IRS representative was available. The agent confirmed that for cash basis taxpayers, the payment date is when the check is delivered as long as there are sufficient funds and the check is cashed in a reasonable time. She also explained that the "mailbox rule" applies - meaning the date it's mailed is considered the delivery date if you use regular mail. Saved me hours of frustration and I got an official answer I can rely on. The constructive receipt doctrine is actually more straightforward than I thought once it was explained properly.

I dealt with this exact situation last year. The key thing to understand is "delivery of payment" vs "clearing of payment." As a cash basis taxpayer, what matters is when you delivered the payment - in your case 2023. The ACH rules between your banks are irrelevant from a tax perspective. What matters is: 1) You wrote and delivered the check in 2023 2) The recipient had the unrestricted right to cash it immediately 3) You had a reasonable expectation that funds would be available The fact that banking delays (ACH holds plus holidays) pushed the actual clearing to 2024 doesn't change the tax year for either of you. You get the deduction in 2023, and they should report the income in 2023.

Has anyone considered the "relation-back doctrine" in this situation? According to my accountant, this is what applies to check payments rather than just constructive receipt. I was told that a check payment is considered made when the check is delivered as long as: - It's dated the day of delivery or earlier - It's delivered before year-end - There's no restriction on cashing it - It's cashed within a reasonable time (usually considered to be within 30 days) This is different from constructive receipt which is more about when the recipient should recognize income.

I went through something very similar with a year-end payment to a subcontractor. The IRS Publication 538 actually addresses this specific scenario under "Payment by Check" rules for cash basis taxpayers. The bottom line is that your deduction belongs in 2023 because that's when you delivered the check, regardless of the ACH processing delays between your accounts. The key factors that support this are: 1) You delivered the check on December 30, 2023 2) The contractor could have deposited it immediately (no restrictions) 3) You had initiated the transfer to ensure funds would be available The fact that ACH rules created a delay in your account doesn't matter for tax purposes - what matters is that you made the payment in good faith with reasonable expectation it would clear. Since it did clear without bouncing, you're golden for the 2023 deduction. For the contractor, they report it as 2023 income since that's when they received the check. The deposit timing is irrelevant under constructive receipt doctrine. Just make sure you keep documentation of the transfer initiation date and the check delivery date in case you ever need to support the timing during an audit.