0n 12/29 my wife received a paycheck $1170.75. On 1/4 it was returned for nsf. do i have to declare it as income for 2016?

[barryjackier]

Wondering if I will have to declare as income for 2016 as it is not likely that my wife will get mt returned until much later in the year if at all.

[Opus 17 · Accepted solution]

Tricky.  You receive money when you constructively receive it (that is, you recieve the money when you receive the check even if you cash it later).  But I think it's a good argument that if the bank account was empty and the check was NSF, then you never constructively received it.

Is she a W-2 employee or independent contractor.

If independent contractor, I would argue that this should not be reported as income.  If the employer issues a 1099-MISC that includes the amount, you can report the full amount of the 1099-MISC as income and then report the NSF check as a business expense.

If she is a W-2 employee, you will need to wait and see if you get a W-2 from this employer.  If you don't get a W-2 or the W-2 is incorrect, there is a procedure to file a "substitute W-2" form to add your correct figures.  But you will need to wait at least until Feb 15 to file (W-2s must be mailed by January 31.)  Ideally you would try to get a corrected W-2 from the employer first.

You can also get your state labor department involved, they will have leverage against the employer and may even have a fund to pay off bad payroll checks, in which case this becomes income again.