WHEN WAGES BECOME TAXABLE - AIPB

S ection 8. when WAGES B ECOME TAXAB LE. In trod u ction Th er e is oft en a la pse of a t lea st a week bet ween t h e t im e wa ges a r e ea r n ed a n d t h e t im e t h ey a r e a ct u a lly pa id. F or in st a n ce, a n em ployee wh o is pa id biweekly wor ks du r in g week 1 a n d week 2 bu t is n ot pa id u n t il week 3. Un der IRS r egu la t ion s, wa ges a r e t a xa ble wh en con stru ctively received by (a ct u a lly m a de a va ila ble t o) em ployees, r ega r dless of wh en ea r n ed. Th is is kn own a s t h e pr in ciple of con st r u ct ive r eceipt .. P ROB LEM 1: Accou n t Cor p pa ys em ployees weekly. E m ployees wh o wor k fr om F ebr u a r y 5 t h r ou gh F ebr u a r y 9 a r e pa id for t h is wor k on F ebr u a r y 13. Wh en a r e t h ese wa ges su bject t o feder a l in com e t a x wit h h oldin g (F ITW) a n d F ICA wit h h oldin g?

Section 8 WHEN WAGES BECOME TAXABLE Introduction There is often a lapse of at least a week between the time wages are earned and the time they are actually paid.

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