Waiting Period Penalty

[johnsantaclara1]

Hi there,

My previous employer sent my last paycheck late. So I received a 1099-MISC with only 1 entry: "Other Income" with the same amount of 4,656 which showed in my last paycheck as "Non-Taxable Earnings": Waiting Period Penalty. My tax consultant entered it in 1040 and says he is right as per https://www.erisapracticecenter.com/2016/04/irs-confirms-california-waiting-time-penalties-are-not-w...

My employer sent this : https://turbotax.intuit.com/tax-tips/small-business-taxes/penalties-for-not-filing-a-1099-misc-irs-f...

1) Is the way my tax consultant entered below accurate ?

2) Would this have resulted in taxes as it appeared under "Other income" in my Federal Income Tax Summary? This amount had shown up in my non-taxable section of my last paycheck, so I assumed that i don't have pay taxes for it, hence confirming. Thank you.

1. FEDERAL INCOME TAX SUMMARY:  OTHER INCOME: 4,656

2. FORM 1040  : 7a: OtherincomefromSchedule1,line9: 4,656

3. FORM 1040 or 1040-SR:
* Other income. List type and amount : 4,656
* Combine lines1 through 8. Enter here and on Form 1040 or 1040-SR, line7a :4,656

4. 2019 California Adjustments - Residents

Section B: Additional income from federal Schedule (Form 1040 or 1040-SR)
Line 8: 4,656

[Bsch4477]

You must have had that amount in Box 3 of your 1099-misc and TurboTax has handled it appropriately. You do pay regular income tax on that amount but do not have to pay self employment tax on it and your employer did not have to take any payroll tax out either. 

[johnsantaclara1]

Thank you so much! Yes, it was in Box 3 of my 1099-misc from my employer. I have 2 questions: 1) Is the way my tax consultant entered accurate ? 2) Do you think that would have resulted in taxes as it appeared under "Other income" in my Federal Tax Summary? This amount had shown up in my non-taxable section of my last paycheck, so I assumed that i don't have pay taxes for it. Thank you.

[Anonymous]

Rev. Rul. 72-268 holds that since the payments of unpaid minimum wages and unpaid
overtime compensation are remuneration for employment, the payments are wages for
federal employment tax purposes (FICA, FUTA and federal income tax withholding),
whether the amounts are paid as a result of a judgment of a court or in accordance with
a stipulation or settlement reached by the parties involved. The ruling further holds that
since payments representing liquidated damages made by an employer to its
employees pursuant to 29 U.S.C. 216(b) of the FLSA are not remuneration for
employment, they are not wages for federal employment tax purposes. The ruling notes
that such liquidated damages payments are includible in the gross income of the employee.
The late payment penalty in this case is different from severance pay because it is based on the employer’s failure to pay final wages on a timely basis. It is imposed by state law because of the employer’s action or inaction with respect to the final paycheck. The employee has no right to payment of the late payment penalty based on the service of the employee; it only applies if the employer fails to pay wages on a
timely basis. The payment of the late payment penalty also does not satisfy the definition of wages in Rev. Rul. 2004-110 because the penalty is not part of the terms and conditions of employment, but a separate statutorily imposed penalty.

so you actually receive the $4656?   It should not have been included in line 1 of your w-2.  It would be taxable compensation 

[johnsantaclara1]

Thank you Bsch4477! Sorry that I am still not fully clearly on answers to these 2 questions: 1) Is the way my tax consultant entered accurate ? 2) Do you think that would have resulted in taxes as it appeared under "Other income" in my Federal Tax Summary? This amount had shown up in my non-taxable section of my last paycheck, so I assumed that i don't have pay taxes for it. Thank you.

[johnsantaclara1]

Thank you Hackitoff, for taking the time to look into my questions and answers them. The amount of $4656 has not been included in my W2, it is in my 1099-MISC. Sorry that I am still not fully clearly on answers to these 2 questions: 1) Is the way my tax consultant entered accurate ? 2) Do you think that would have resulted in taxes as it appeared under "Other income" in my Federal Tax Summary? This amount had shown up in my non-taxable section of my last paycheck, so I assumed that i don't have pay taxes for it. Thank you.