Thank you to those that responded to my request for information. It always amazes me with the number of responses that I receive when a request for information is made. We have a great organization. The answer to my question appears to be that constructive receipt (IRC Sec. 1533) is the determining concept. Since the check was cut and was available to the employee to pickup on December 30 if the employee had made the proper arrangements, the payment is taxable in 1999. The payment cannot be construed as deferred income even though the payment was for January. IRC Sec. 1537 which relates to deferred income states, in part, that "Inclusion in the year of receipt is required regarding amounts that are paid for future services." Again, the concept of constructive receipt applys to determine the year of receipt. Further, regarding the disability payment, it is includable if in fact the employer is providing the disability benefit. The benefit payment, not the premium paid by the employer, is included in gross income. In addition, if the employer includes the cost of the coverage in the employees gross income or if the disability benefit is employee funded, the benefits when received are excludable from gross income. Again, thank you to all who responded. Your assistance is appreciated. Marc Puckett City of Costa Mesa > -----Original Message----- > From: PUCKETT, MARC R. > Sent: Monday, March 13, 2000 3:36 PM > To: '[EMAIL PROTECTED]' > Subject: IRC Re. Taxable Gross Income > > We have an employee that received a disability payment on January 3rd, > 2000. We mailed the check out on December 30 dated December 30. The > employee claims that the W-2 she received incorrectly included the payment > in her 1999 W-2 since we prepay disability payments and the payment > related to January,2000. The employee wants us to adjust the W-2 and > exclude it from 1999 taxable earnings. My question is: Which year does > the payment belong in her W-2, 1999 or 2000? > > Can an employee claim that they are on a cash basis and that the payment > is taxable to them in the year it is received? > Does the employee fall under the claim of right doctrine, in that, a > taxpayer receiving income under a claim of right is taxable on the income > in the year received even though her right to retain the income is not yet > fixed? > > Any assistance you can provide would be appreciated. > > > Marc Puckett > City of Costa Mesa
