IRS tax question

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Joined: 05/23/12
Posts: 680
IRS tax question

Hi ladies, can anyone tell me if a person work and earns money in Dec. 2012 but doesn't get paid for that money until January 2013, does that money get counted as earned and taxable money for 2012 taxes or for taxes to be paid for 2013?

I've been searching for this question and answer on the IRS website but so far no luck. It seems like it'd be simple enough to answer on the IRS site.

MissyJ's picture
Joined: 01/31/02
Posts: 3210

I tried to go digging for you both on the IRS site and Turbo Tax as well. My thought was that it would be counted in the year received -- not necessarily earned. What I found though was a bit more muddled. It appears that the answer varies based upon a number of different circumstances (examples: if you will receive a 1099 on the income for 2012; whether it would be considered "constructively received"; etc.)

My personal advice would be to reach out directly to the IRS helpline (now likely isn't *as* busy as it will be after the end of the month.) I don't know if you are asking as an individual or perhaps a personal business? Here is the link that can provide you with all the numbers available: Telephone Assistance

Good luck!

~Missy

Joined: 03/19/05
Posts: 338

It probably depends upon how the employer reports the earnings. DH's last payperiod of 2012 ended Jan 5th, all his earnings that week counted on 2012.

Joined: 05/23/12
Posts: 680

Thanks Missy. I really thought it'd be such a simple thing. All of his pay for Dec. is employer paid and not on a 1099. The pay period ended Dec. 31 but he gets paid each month on the 15th. The company is saying that it matters when he gets paid, not when earned. But that just seems counter-intuitive to me. They may be right, but I think I'll definitely call the IRS and ask. It just doesn't seem right to me and I'd like to make sure.

Spacers's picture
Joined: 12/29/03
Posts: 4100

In almost all cases, the income is counted as when it is actually paid out by the employer. So if you get paid in January for December work, it will be counted on next year's taxes. But your check from last January for Dec 2011 will be included in this year's taxes so it all washes out in the end. It doesn't matter whether the income reported on a W-2 or a 1099, or whether you pick up your December 31 check on January 3. What matters is when the check is dated.

There are a few cases where someone might elect, or be required, to use accrual accounting. In that case, the income is counted as when the work was performed by him, not on when he received the money for it. Your husband would probably know if he were one of those cases. Smile

Joined: 05/23/12
Posts: 680

Oh thank you so much!

I judt got off the phone with the IRS and it was a loooolong wait of an hour. Luckily I was cooking and no biggie.

So they said the same as you Stacy. And so we are squared away now.

Thanks so much!