Doctrine of Constructive Receipt!
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/