We have an employee that received a disability payment on January 3rd, 2000. We mailed the check out on December 30 dated December 30. The employee claims that the W-2 she received incorrectly included the payment in her 1999 W-2 since we prepay disability payments and the payment related to January,2000. The employee wants us to adjust the W-2 and exclude it from 1999 taxable earnings. My question is: Which year does the payment belong in her W-2, 1999 or 2000? Can an employee claim that they are on a cash basis and that the payment is taxable to them in the year it is received? Does the employee fall under the claim of right doctrine, in that, a taxpayer receiving income under a claim of right is taxable on the income in the year received even though her right to retain the income is not yet fixed? Any assistance you can provide would be appreciated. Marc Puckett City of Costa Mesa
