constructive receipt of paid time off

Bonzo

Must "earned time" that is carried over to the next year without payout be considered income for tax purposes (constructive receipt) if there are specific rules under which the payout must occur? For example, 80 hrs must be left "in the bank", and at least 10 days vacation must have been taken during the past 12 months in order to have banked earned time paid out.

Don D

[font size="1" color="#FF0000"]LAST EDITED ON 06-18-02 AT 10:07AM (CST)[/font][p]bonzo: I hope I understood your question. I just asked our comptroller. He says "The IRS goes by check date" and the W-2 for the year in which the wages are PAID (check date) will reflect that amount. I guess everybody who pays for hours actually worked, at the end of the year finds himself paying people in January for work done in December. We used to all call it 'holding back a week or two'. Now we call it 'paying for work actually done'.

NaeNae55

I realize I am weighing in late with this, but I just read this one and couldn't let it go. The IRS considers "constructive receipt" to be when the employee "could" have received the money, not when they actually did. In normal cases you pay taxes based on the date you receive your pay. However, if your leave program allows the employee to choose cash or carry it over, the IRS may see the leave as constructively received, and expect taxes, even if the employee chooses to carry it over. It depends on the wording of your leave policy and is tied to the employee's option to receive cash. I believe a visit with a tax accountant is in order here.

Don D

This is way over my head. That's why I quoted a CPA. I'll let the bean counters fight this one out.