Income Tax question, about the end of the year?

Question

Do you pay taxes for the year based on what you earned for that year or when you got paid (meaning the date on the check) so if this year for the month of december you made some money, and got the check in january and it was dated january date, would you file it for 2007 or 2008

Answer 1

2008, in your example.

Most taxpayers use cash accounting, which means that income and expenses are credited when received and paid, respectively. With accrual accounting, income is accounted for when earned, and expenses are accounted for when incurred.

As an employee, however, it will probably be easier to just accept whatever your employer puts on your W-2. Obviously, you can make a copy of the check to prove that you didn't receive it during 2007, but you can expect an audit (even though you will probably win.)

The only thing to be careful about is that you are considered to be paid when the check is available even if you don't actually receive it until later. So, you can't shift income to the next year by waiting to pick up your check.

Answer 2

It's based on the date on the check - for any given year, you pay taxes on all the checks you got dated that year. If you did work in December but the check was dated January, it'll be on your W-2 for the following year.

Answer 3

I am just trying to think how many people would spend the tax, and would then be broke by the time it became due. Even if a miracle occurred, and people didn't spend the money, they would become past masters of dreaming up reasons to not pay. Paradoxically, the 'Community Charge' (Poll Tax) was an attempt to have local authority charges changed from a tax to a payment for services rendered. It was a sound idea, but the 'lefties' stamped their feet, and got it kicked into touch.

Answer 4

That would depend on when your employer or payroll company cut off payroll for the year.

Let me clarify my answer.

If your check is dated for January, 2008 it is for 2008. If it is dated December 28, it MAY be for 2007 or 2008 if the payroll was closed prior to that date.

Answer 5

Paycheck received in 2008 will be included in 2008 income. Your income from job is what you actually receive in 2007. If the check is issued in 2007, then it is considered that you received in 2007, even if you did not actually receive it or did not cash it in 2007.

Bruce J, are you following what you just said?

Answer 6

If you are a tax basis taxpayer (most individuals are) you pay taxes based on the date you received the money (in your case the check date) and not the date you earned it.

Answer 7

it's called "constructive receipt". you received the payment in 2008, it goes towards 2008 regardless if it was actually for the hours you worked in 2007.

Answer 8

You would file based on the date that you recieved the income. If the check is dated for January, it's income for the following year.

By the way, paying federal income tax is voluntary. There is no law requiring you to pay it. Check out the film 'America:Freedom to Facism', and don't pay another dime in income tax until the IRS shows the American people a law that requires us to.