One of the quirks about our US tax system is that there are often little oddities here and there. One of them came to the forefront when an employee had a question with his recently-received W2 form. He looked at all the dates he worked, from January 1st 2014 through December 31st 2014, and noticed the amounts from his paychecks didn’t add up to the amount shown on his W2 form.
Fortunately, the answer was clear and simple, and didn’t require much research. The reason is that the government only counts income earned in a particular year based on the dates of each paycheck, not on the actual dates worked. Basically, for most folks, the last pay period they will work is the first pay period in December. The final pay period in December will actually be a part of the FOLLOWING year’s taxable income.
For example, Joe is hired on December 15th, 2014. He then works 72 hours from December 16th through December 31st, 2014. He gets paid for those hours on a January 7th paycheck, 2015. He will NOT receive a W2 for 2014. The hours worked, EVEN THOUGH THEY WERE WORKED IN 2014, are not counted as income in 2014. They are counted as income in 2015.
This is just one of the odd little quirks that sometimes don’t make total sense in a logical way, but are part of our tax code.
Fortunately, most businesses use a computerized payroll program, or outsource payroll companies who do, and so these little quirks are managed by the system, and aren’t prone to human error. But just in case YOU ever get asked this question by an employee, this is the reason. And here’s an article explaining it in further detail:
Happy tax season!