If a check for salaries paid is lost in the mail and re-issued the following year, which year does the employee pay taxes?

Question

I did work in 2021, and was sent a check for it in 2023. The check never arrived (apparently lost in the mail). In 2024, a stop-payment order was put in by the employer for the previous check, and the check was re-issued. I was able to deposit it successfully.

I did not declare income in 2023 for this check on my taxes, as it was nowhere to be found. My employer is refusing to send a W-2 for 2024, saying that they have a 2023 W-2 and that is the correct one. However, my impression is that taxes should be paid the moment the money is made available to deposit, which it was not until mid-2024. It wasn't even close to 2023.

Which one of us is right in this situation? Should they issue me a W-2 for 2024? And if not, how can I proceed / will I be fined for non-payment of 2023 taxes? Thank you for the help.

EDIT: I read more on this, and the governing rule here seems to be 26 CFR § 1.451-2 Constructive receipt of income. It says that income is constructively received by the taxpayer for the 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.".

However, the critical limitation follows: "income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions."

The regulation provides a specific example in § 1.451-2(b) that's relevant to this situation: "if a dividend is declared payable on December 31 and the corporation followed its usual practice of paying the dividends by checks mailed so that the shareholders would not receive them until January of the following year, such dividends are not considered to have been constructively received in December." This means that the receipt of income is the moment of receipt of the check. The first check I received for this income was in the year 2024.

This seems contrary to the most upvoted answer. Can anyone help to reconcile these opposing views on the question? What is the a source supporting that the income was constructively received (and therefore taxes should be paid) in 2023?

Answer 1

I think you made a mistake last year by not addressing this issue a year ago.

Payroll is tied to a specific tax year. When an employer does payroll, they send the employee a check and they also make a payment to the IRS in your name. The W-2 tells you how much taxable income was paid to you and how much was sent to the IRS on your behalf.

The company can’t, a year later, just change the W-2, as this has to match what was paid to the IRS.

I think the way you’ll need to fix this is to amend your 2023 tax return to include this income and tax withheld. If this results in an additional 2023 refund, then there won’t be any penalty or interest, either.

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All of the talk in the comments about whether or not the income belongs in 2023 or 2024 based on when he received the check are kind of irrelevant. As far as the individual goes, those rules are for non-employee income, such as business income. When you get a 1099-MISC or 1099-NEC that is not correct, it doesn’t matter a whole lot; your business reports the actual income you took “constructive receipt” of during the tax year. Not so with W-2 income: Your employee income on Form 1040 Line 1 has to match the sum of your W-2 forms; you can’t just add or remove income here. Likewise, your tax withheld reported later on the 1040 also has to match your W-2. If your W-2 isn’t right, you have to get it fixed.

From the company’s perspective, they sent the check and paid the OP in 2023. They don’t know if the OP lost the check or if the mail did, but they reported it and paid taxes on it in 2023 exactly like they should have. They have issued a replacement check, but that does not change any of their books. I doubt you’ll be able to get them to make any corrections to their 2023 and 2024 books at this time.

Answer 2

In general, you pay tax for income in the year you receive it. So you should include this income in your 2024 tax return.

Since this will not match your 2024 W-2, the IRS may send you a notice about this (I'm surprised they didn't notice it last year). You'll need to explain what happened, and they will most likely accept it. Mistakes like this probably happen all the time, they're surely use to it.

The two should cancel each other out, unless you were in different tax brackets in each year, so it's "no harm, no foul".