AIPB Mastering Payroll (National) Practice Exam

The concept of constructive receipt revolves around the idea that income is realized for tax purposes when it is made available to the taxpayer, regardless of whether they have actually taken it. Thus, the key aspect is that wages (or income) are taxed when they are accessible to the employee, not merely when they are formally paid out in cash or check.

This means that if an employee has the right to receive wages but hasn't physically received them yet, they are still considered to have received the income for tax purposes. This principle ensures that taxpayers cannot simply delay receiving income to avoid tax liability. Consequently, the timing of when the taxpayer can access the income is crucial, making the availability of the wages the determining factor for taxation rather than the actual receipt of the funds.

Understanding this concept is essential in payroll management and tax compliance to ensure that tax obligations are met appropriately in relation to when income is deemed to be received.