"W2's only report wages paid for services performed in the calendar year." If this was a TurboTax message, ignore it. What it's implying is not to report other years' W-2s in the current year's return. Since taxable wages were reduced in prior years but you didn't get the excess until 2025, the 2025 W-2 is correct.
For cash basis taxpayers, income is taxable in the year received, and not the year earned.
