A friend was given a contract last year, and due to varying circumstances, they had not been paid for two months before the company broke the contract and stopped giving work. The checks had been stolen by someone within HR and then ran off. The company still has yet to reimburse the friend any of the money they owe, let alone the early termination fee (they're still trying to find a lawyer even willing to take the case).
How do they file taxes for this unprovided income? Does it not count until it's in their hands? Does the fact the friend lives and works in Texas, while the company they work for is based in California (internet work) influence this at all?
Taxes before or after pay?
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Taxes before or after pay?
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You don't file anything that you actually haven't received or done.
YOu'll always have to file state taxes for you live. Depending on the state, you might also file taxes for the state in which you work or the company where the check comes from.
An example that might not apply to your case.
My wife works for a company based in NYC. But she has actually been working in NJ for another company as her company contracted her out. We live in NJ.
So we pay NJ taxes because we live in NJ. We (she) also pays NY taxes because that's where her money comes from.
On a tangential note, this created all sort of havoc for a while when we had to figure out which state we file short term disability/fmla (mother-child bonding) since the guidelines are way too vague.
YOu'll always have to file state taxes for you live. Depending on the state, you might also file taxes for the state in which you work or the company where the check comes from.
An example that might not apply to your case.
My wife works for a company based in NYC. But she has actually been working in NJ for another company as her company contracted her out. We live in NJ.
So we pay NJ taxes because we live in NJ. We (she) also pays NY taxes because that's where her money comes from.
On a tangential note, this created all sort of havoc for a while when we had to figure out which state we file short term disability/fmla (mother-child bonding) since the guidelines are way too vague.
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Josh_Kablack
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As an individual taxpayer in the US of A you only pay taxes on money actually received*. However sometimes paperwork errors (like an incorrect w-2) can place the burden of proof on such an individual that money was not actually received. If this is one of those situations, your friend should hold on to copies of all income documents (w-2s, 1099s, paystubs, etc) and any legal filings related to this case, and should probably proactively contact the IRS (although early March is the best time to try that).
As for states, Texas has NO state individual income tax, and last I had to deal with it, that meant nothing will be due at the state level. (Although I would advise you to double check California state income tax laws and any local taxing authorities to be sure)
*Unless said taxpayer files a sole proprietor/spousal partnership Schedule C electing to use the "accrual" accounting method.
As for states, Texas has NO state individual income tax, and last I had to deal with it, that meant nothing will be due at the state level. (Although I would advise you to double check California state income tax laws and any local taxing authorities to be sure)
*Unless said taxpayer files a sole proprietor/spousal partnership Schedule C electing to use the "accrual" accounting method.
Last edited by Josh_Kablack on Thu Jan 31, 2013 8:35 pm, edited 1 time in total.
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