Phantom Income: Why You Might Owe Taxes on Money You Didn't Actually Receive

In this episode of How to Lower Your Tax Bill, host Terrence Hutchins explains one of the trickiest pitfalls in tax planning—phantom income. Terrence breaks down the critical IRS doctrines of constructive receipt and economic benefit, helping you understand why you might owe taxes even when you don’t have cash in hand.

Whether you’re a business owner, investor, or receive stock-based compensation, this episode will help you spot hidden tax traps and plan ahead more effectively.

Key Topics Covered:

• How tax law defines income—even when you haven’t been paid
• Real-world examples where taxes can hit harder than expected
• What to know about depreciation, business vehicles, and partnership income
• Why proper planning can prevent costly surprises

Featured Tax Case: In Sproul v. Commissioner (1945), the court ruled that even though a trust payout was scheduled for future years, the taxpayer owed tax immediately due to guaranteed access. A key reminder that tax law doesn't always follow the cash.

For more smart tax strategies, subscribe to How to Lower Your Tax Bill on Spotify or Apple Podcasts.

And remember: Keep More of What You Earn.