I'm receive a 1099 for paid commission. The company failed to pay me everything. I am suing for the past wages. Do I claim this income not received?

[cincywoman510]

I am an independent travel agent.  I work from my home but work under a company umbrella.   I am paid on a commission basis only.  The company (such as Disney where the family traveled)  pays the company 100% of the commission once the travel is completed.  The company is then supposed to pay me 70% of that commission.   At the end of the year I am sent a 1099 of the commission that was paid to me.  Over the last year or more the company failed to pay me the commission due.  They would send a little bit or pay part of one trip to keep me working for them.  I have since left the company and am employed somewhere else.  I am suing for the past wages I am due.  My question is:  Do I claim this income even if I didn't receive it?  My other question is:  I still had all of the expenses even though I didn't get paid.  Can I still claim them?  The finally, once I win my court case and these wages are garnished from the company and paid to me do I claim them then?

[Kat · Accepted solution]

1)  You must include any income that you have received during tax year 2018.  You'll be receiving a 1099 from the company that should include all the commission that you were actually paid.  Be sure that the amount shown on your 1099 agrees with the amount you actually received.  DO NOT include income that you have not received.

2)  If you incurred expenses during 2018, you should enter all of those qualified business expenses in your 2018 tax return.  This will decrease your tax liability for tax year 2018.

3)  When you receive compensation of commissions that you were owed, but not paid, (hopefully in 2019), you'll enter that income in the return for the tax year in which you receive it.    

[czarnowski · Accepted solution]

Q1: Do I claim this income even if I didn't receive it?

A: No.  "Income" is not "income" until you receive it.  

Q2: I still had all of the expenses even though I didn't get paid. Can I still claim them?  

A:  Yes.  Expenses incurred with the expectation of earning money are deductible.  Don't forget legal fees.

 Q: Once I win my court case and these wages are garnished from the company and paid to me do I claim them then?

A: Yes. If and when you receive payment, report it.