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Subject Author Date
Tax Consequences of Paydate Ed 03-13-2008
Posted by Ed on March 13, 2008, 2:15 pm
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 If I issue a bonus paycheck to employees for the payroll period ending
December 31, 2007 but date the check with the current date, are there
any tax consequences for last year in terms of either payroll taxes or
employee income tax? I think the only thing that matters is the date
the employee was paid (current date)? Is that correct? Thanks.

Posted by Allan Martin on March 13, 2008, 2:39 pm
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> If I issue a bonus paycheck to employees for the payroll period ending
> December 31, 2007 but date the check with the current date, are there
> any tax consequences for last year in terms of either payroll taxes or
> employee income tax? I think the only thing that matters is the date
> the employee was paid (current date)? Is that correct? Thanks.


The date the check is issued determines which tax year the wages get
reported.


Posted by dpb on March 13, 2008, 4:49 pm
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Allan Martin wrote:
>
>> If I issue a bonus paycheck to employees for the payroll period ending
>> December 31, 2007 but date the check with the current date, are there
>> any tax consequences for last year in terms of either payroll taxes or
>> employee income tax? I think the only thing that matters is the date
>> the employee was paid (current date)? Is that correct? Thanks.
>
>
> The date the check is issued determines which tax year the wages get
> reported.

For the business -- for the employee it will be when they receive it as
they will almost certainly(:) ) be on a cash basis on their tax year.

--

Posted by Laura on March 13, 2008, 5:04 pm
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> Allan Martin wrote:
>>
>>> If I issue a bonus paycheck to employees for the payroll period ending
>>> December 31, 2007 but date the check with the current date, are there
>>> any tax consequences for last year in terms of either payroll taxes or
>>> employee income tax? I think the only thing that matters is the date
>>> the employee was paid (current date)? Is that correct? Thanks.
>>
>>
>> The date the check is issued determines which tax year the wages get
>> reported.
>
> For the business -- for the employee it will be when they receive it as
> they will almost certainly(:) ) be on a cash basis on their tax year.

Those are the "official" guidelines from the IRS using the concept of
"constructive receipt".

But in reality, the w-2 received (and reported to the IRS/SSA) will be based
on the paycheck dates not the year the employee received it. With many
companies using Direct deposit the last paycheck of the year when dated in
that year will be included on the 2007 w-2. It is not worth the hassle with
the IRS to have the company report one number to the IRS and you decide to
use a number that is not reflected on the w-2 received.



Posted by dpb on March 13, 2008, 8:01 pm
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Laura wrote:
>> Allan Martin wrote:
>>>
>>>
>>>> If I issue a bonus paycheck to employees for the payroll period ending
>>>> December 31, 2007 but date the check with the current date,...
>>>
>>> The date the check is issued determines which tax year the wages get
>>> reported.
>>
>> For the business -- for the employee it will be when they receive it
>> as they will almost certainly(:) ) be on a cash basis on their tax year.
>
> Those are the "official" guidelines from the IRS using the concept of
> "constructive receipt".
>
> But in reality, the w-2 received (and reported to the IRS/SSA) will be
> based on the paycheck dates not the year the employee received it. With
> many companies using Direct deposit the last paycheck of the year when
> dated in that year will be included on the 2007 w-2. It is not worth the
> hassle with the IRS to have the company report one number to the IRS and
> you decide to use a number that is not reflected on the w-2 received.

If I were working for you and you waited until nearly first of April to
make a so-called "year-end" bonus, unless it were really to my advantage
to take the tax hit in '07 I'd argue to point w/ the IRS if they
questioned it. I'd note on the return the reason for the discrepancy
and highly doubt it would ever be questioned.

If, rather than "current date" OP means at (or very near) the time the
standard year-end payroll were paid, that's something else again. I
read the question as only having any validity asking now as a delayed
payment, but I suppose he could be looking at tax implications of a
previously-executed action--that didn't occur to me until now, though.

--


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