Declaring back pay

[DonnaBear65]

I am working on an H1B. My previous employer from my home country will finally be releasing back pay that we have been debating over for a year. 

The work was completed prior to my starting my H1B but the pay won’t be released for another few weeks (estimated).

How do I declare this on my taxes? Or should I give back the pay? 

[pk]

@DonnaBear65 , 

(a) Which country are you from  and when did you enter with H-1B ?  

(b) The work that you did for your home-country employer  -- was it done here in the USA or while you were physically in your home country ?

(c) What is/was the basis of the dispute ?

What we need to determine is the sourcing country for the delayed payment and hence the questions.

Generally IRS position is that the sourcing of income is where the actual work is performed. There is also the concept of "nexus".  And of course some of these categorization may be influenced by any in-effect  Tax Treaty between the US and that country.

I will circler back once I hear from you --yes ?

[DonnaBear65]

Hi!

1. it was Canada 

2. while I was physically in my home country

3 it’s part of a stipend program - while you work there, if you took on extra work, you could trade the credits for a stipend. I left before the project was complete, so I could still receive the stipend but it couldn’t be ‘cashed out’ until the project was complete, even if I was no longer involved. They misfiled my employee status from when I was employed (one status employee could use this program, others couldn’t, I could but it took a long time to sort out).

[pk · Accepted solution]

@DonnaBear65  generally IRS holds  that back pay is taxable in the year when received. However, if you received the back pay during  NRA status, this back pay from foreign source would not be included in your US income -- depends on your own tax status ( NRA or Resident for Tax purposes ) and when the back-pay is constructively received.  Note that as H1-B worker, if you meet the Substantial Presence during the year, then your first day of residency status is the first day you were legally present in the US.

Does this help ?  Is there more I can do for you ?