P/R check distribution

[Gretel]

I have a weird situation.

Client's pay period ends on a Sunday. His "official" check date is Monday. My state allows 6 days after end of pay period to give check to employees, so this is what he does, give them the check on Saturday.

I find this odd and wonder if there are any IRS rules covering this.

[JohnH]

That is odd. I wonder if he's really in compliance with the state rules, since the check he gives them on Saturday can't be cashed until Monday. Is is dated on Saturday or is he giving the employees a post-dated check on Saturday?

I believe the IRS position would be that the pay period is the date of the check, insofar as Federal Tax Deposit requirements are concerned..

[Gretel]

That is odd. I wonder if he's really in compliance with the state rules, since the check he gives them on Saturday can't be cashed until Monday. Is is dated on Saturday or is he giving the employees a post-dated check on Saturday?

I believe the IRS position would be that the pay period is the date of the check, insofar as Federal Tax Deposit requirements are concerned..

Check date is Monday, therefore this check date determines deposit requirements, which are observed. I never thought about that the checks cannot be cashed until Monday, unless he has them available early Saturday morning. Thanks, John.

[Koss]

Check Date

I agree with JohnH that the date of the check probably controls in this particular situation.

I can see certain questions arising at the end of the year, with respect to determining which year the pay is allocated.

December 31, 2011 was a Saturday...

But if the check was dated for the following Monday, the pay would go to the following year's Form W-2.

I think the date of the check controls in this context because the check is postdated. The party making the payment isn't obligated until that date.

On a different fact pattern, it could be the other way around. An employer having cash flow problems might have dated the checks December 31, 2011, but not made them available to employees until January 2, 2012.

In my view, this is very subtle, and very fact-specific. If the checks are issued, and theoretically available for pickup, but the business is closed for the New Year holiday, then I think it's reasonable to include the pay in 2011. Likewise, if the custom, or the preference of the employee, is for the check to be mailed, then the employer knows darn well there's no way that check will be cashed until at least January 2 or January 3, but you still consider it paid in 2011.

But if the employer is intentionally withholding the check, or intentionally postdating it, then that has an impact on the tax treatment.

BMK

[JohnH]

Looping back on this, if the check is dated Monday, then he is really giving the employee a promissory note on Saturday, not a paycheck. (If the bank is open on Saturday he cannot cash the post-dated check).

So if the state requires that the employee be PAID within 6 days, the post-dated check won't fulfil the requirement. If just handing them a paycheck within 6 days is all that is required, he could just as easily hand them a paycheck on Saturday that's dated for next Wednesday, for example.

That may not matter in the overall scheme of things, but if it happens that it does matter in your state, it's really a big deal. He may be going merrily on his way thinking he's OK whil not being in compliance with the very rule he's trying to satisfy.

[Gretel]

I noticed a little misunderstanding and I will need to talk with my client. I also double checked our State employment laws and the employer actually has 10 days to pay.

Misunderstanding is between the two Mondays mentioned. Let's use actual dates.

Pay period ends on Sunday, 20th. Date on check is Monday, 21st, Checks actually available to employees is Saturday, 26th. I know that cash flow problems is why he is doing this way. What doesn't make any sense is that he doesn't use Saturday, 26th as check date to begin with. Would also help his cash flow problems and is still within the 10-day window for making funds available to employees.

Thanks, John and Burton, for your input. Now, at least I learned that employees are really f. here in my State, giving the employer 10 days for payment of wages. Only if employer makes fully use of this, that is.

[JG EA]

I have a weird situation.

Client's pay period ends on a Sunday. His "official" check date is Monday. My state allows 6 days after end of pay period to give check to employees, so this is what he does, give them the check on Saturday.

I find this odd and wonder if there are any IRS rules covering this.

The state allows 6 days AFTER the end of the pay period. It is therefore not necessary to date them the day after the pay period. Just determine the waiting period - in this case 6 days and have that time ot get the checks ready. Date them on that predetermined date. I think if the pay period ends on Sunday, just get them ready and date them when they are distributed.

I don't see anything wrong with Saturday - banks are often open on Saturday. But if the employees complain just date them on Friday and distribute them on Friday.
As was said of course the date of the check determines all filings.

Your state is tough. I know employers that don't pay people until two weeks to a month after the end of the pay period.