I started a new job in Nov but was not paid for Nov & Dec hours until Jan 2008.
My employer stated that I would not be receiving a W2 for 2007 because the wages were paid in 2008. Is this true even though the wages were earned in 2007?

This is perfectly reasonable for your employer not to issue any W-2 in 2007 for wages paid in 2008. The reason is the "Doctrine of Constructive Receipt".

What matters to the IRS is when the wages were physically paid and not when they were accrued. The IRS is requiring employers to report on a cash basis and not accrual basis. Thus, only what has been paid in 2007 is a reportable tax event and warrants a W-2.

Since you were not paid in 2007, no W-2 is required by the IRS and so none is issued to you due to the fact that constructively "you had received the wages in 2008."

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Tax Guru,

Can you provide a reference for this? I'm in a very similar situation - income earned in 2007 but paid in 2008. I had hoped to have the employer deduct from that paycheck and credit to my 401k for 2007, but they are saying that because the pay was received in 2008, it can only be credited for 2008.

Corgrim

Using the principles of “constructive receipt” we can safely say that the income earned but not received to you by 12/31/07 is not includeable in your W-2. You are what the IRS tax law claims a cash basis taxpayer, employers are not required to accrue the employees last 2 weeks pay into his or her W-2. This would not be fair, as the taxpayer would incur a tax liability on monies he has not been physically paid.

"Treas. Reg. § 1.451-2(a) defines the term “constructive receipt” as follows:

The General rule.
"Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given."

However, the Reg states that "income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions." Thus, the last 2 weeks pay was not in your control and accessible to you, hence it is not constructively received, and so omitted from 2007 W-2 income/

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