I put it in the same absurd category as assessing taxes on the interest on a multi-year bank certificate of deposit in which the interest compounds. But no! “Uncle” says that is “income” in the year credited to the account, and therefore taxable that year. The same holds true if someone owns stock and has the dividends automatically reinvest in new shares. Never mind that you don’t actually “get” the interest on the CD or the dividends on the stock (as in get to spend it for anything, or get to realize any benefit from it) until the year the CD matures or the year you sell the stock (and either make or lose money on it).