Tax question

My new assistant had a seasonal job at the end of December 2014. He got his last paycheck in 2015. When he called to ask about his W2 for 2015, he was told that the company didn’t owe him one because his income was in 2014.

We both thought that according to the IRS, income must be reported for the year that it was received.

How say you folks? I know that you are not his tax advisor and if everyone says that he needs to talk to a professional, that is what I will tell him.

It’s for the year it’s earned, not received. The last paycheck would have been included on his W2 for 2014.

Thank you for the fast answer and conformation as to what he was told. He was worried and I had no idea. He will be much happier with an independent party telling him what he was told by a company he has no reason to trust.

Of course, this is not how paycheck stubs do it, when they show the “YTD” field. If you get paid in early January for work done in December, the stub doesn’t take that into consideration, and just includes it in the new year when it calculates YTD.

If you still have the stub (or can access a copy of the check) take a look at it.
My employees work Monday through Sunday and receive their checks on Wednesday but the checks are dated on that Sunday.
So, for example, if an employee worked December 28, 29, 30 of 2015, she’d get a check dated January 2, 2016. She could quit on December 31st 2015 and never actually work for me this year but still receive a 2016 W-2*.

2014 ended in the middle of a work week. That’s probably what happened. He probably worked the beginning of the week (2014) and the check was dated for the end of the pay period (2015).

It’s a huge PITA to do an unscheduled payroll and there’s not really any advantage to doing it so as far as paychecks are concerned, it’s business as usual, just like any other week.

*This is why I always tell people you shouldn’t run and do your taxes the very second you can. I’ve had friends do their taxes as soon as they get their W-2 only to have to have them amended when they get another w-2 or 1099 from a place they forget they worked for a few weeks or from a savings account they forgot about. It’s one thing if you KNOW you only worked at one job, but if you hop around, it’s safer to wait until a week or two after January 31st and a bit after Feb 15th if you might get 1099s.

I believe this is wrong. Wages are taxable and included on W2 when employee has constructive receipt of funds. Money received in calendar year 2015 should yield a 2015 W2 unless there was constructive receipt in prior years.

If his paycheck was less than $600 and he had no withholding, it looks like they are not required to file a W-2.

From the IRS instructions for the W-2:

"Who must file Form W-2. Every employer engaged in a
trade or business who pays remuneration, including
noncash payments, of $600 or more for the year (all
amounts if any income, social security, or Medicare tax
was withheld) for services performed by an employee
must file a Form W-2 for each employee (even if the
employee is related to the employer) from whom:

  • Income, social security, or Medicare tax was withheld.

  • Income tax would have been withheld if the employee
    had claimed no more than one withholding allowance or
    had not claimed exemption from withholding on Form
    W-4, Employee’s Withholding Allowance Certificate."

When I worked at the state university we got our pay checks on the first of the month following. So my work in December 1974 was paid Jan 1 1975. The pay was included in my 1975 W2 form. It cost me more in taxes and I complained. I was told that the date the check is issued is what determines what year it is taxable in.

To add a citation to my previous post, here isIRC section 451:

And not as authoritative, butIntuit’s guidance says essentially the same thing:

**flatlined’s **friend should get a W2 for 2015.

Doug K. is wrong and Bone is right. What matters is the date on the paycheck, not the pay period it covers.

If your check is dated December 31st and it arrives in your mailbox on January 5th, then it counts for December of the previous year. But if the date on the check is January 1st, then it counts for January of this year.

This is how the IRS does it, and also the Oregon Dept of Revenue. They only care about the pay day, not the pay period.

However, there is an exception which may apply. If your total pay for a given year is less than $600 then the IRS says the employer isn’t required to fill out the paperwork for that year. This mostly applies to temp, contract, or seasonal workers but it might apply here.

If we’re really splitting hairs, you could argue that the paycheck was not available to the employee until January if it didn’t get into his mailbox until 1/5.

But from a practical perspective, the date on the paycheck is what most accounting systems use and so it will normally work the way you describe.

The only reason I even brought up that possibility was to say that maybe the employer in question actually did write the check in December, despite the fact that the employee said he got his last paycheck in January. Mailing it was just an example. Perhaps the check was sitting on someone’s desk on December 31st and they said “Hey let’s give this check to Dave when he comes. Oh wait, Dave isn’t coming back. Gee I guess we better mail it to him unless he wants to make a special trip.” We weren’t there; we don’t know it was “available” to Dave or not. So maybe, just maybe, the company didn’t do anything wrong.

The point remains, however, that paychecks count as of the date which is written on the check and the pay stub, and NOT in the pay period during which the work was done. For lots of people, it’s the same month. But many times, it’s not.