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  1. #1
    Join Date
    May 2006

    Question Filing Tax return for the money receiving from Escrow

    I reported a wage-claim with Texas Workforce Commission in the year 2005 and by mid of 2005 Texas Workforce Commission ruled in my favor and asked employer to deposit money with Texas Workforce Commission. Employer did that at the same time it appealed to Texas Workforce Commission's determination order and asked that money be held in Escrow, and the amount they deposited with Escrow was after taxes. (For e.g. if Texas Workforce Commission determined they owed me 10,000 dollars before taxes then employer deposited only 6000 something in Escrow).
    Now, In 2006 I am about to receive money from Escrow which was withheld with the court. I want to know how can I report my this income with IRS for tax refund if I am eligible for one and certainly I don't want to end up paying tax twice on the same amount. I doubt I would receive any W2 for the money received from escrow.
    I know I have plenty of time from now till next year's tax return however, I would like to know it now and better be safe than sorry.
    Thanks for your response in advance.

  2. #2
    Join Date
    Nov 2005

    Default Re: Filing Tax return for the money receiving from Escrow

    Since you are a cash basis taxpayer, you would report the income in the tax year you receive it. Likewise, your employer would report your wages to the government and pay any taxes on it in the appropriate quarter of the tax year involved. What should happen is that once there is an order to release the escrow to you, the employer would be required to report that as wages and pay any taxes due on it. And then you should receive a W-2 at the end of the year. I am sure that the State of Texas will be looking for those wages to be reported to it, so I don't think you have to worry about a W-2.

    BTW, you probably will or have received the statutory rate of interest on your money which is taxable income. You should get a Form 1099-G at the end of the year for the interest. If you don't get a Form 1099 at any time you should have received one, then the governement is not looking to match up the income that others have reported to it with income on your tax return. I can't tell you to not report income....Though if you don't report income that somebody has already reported paying you, the government will modify your tax return to reflect it and assess you the tax due, which may include interest, depending on how long it takes the government to find the error, which will decrease any refund or increase any amount due. In some cases, like interest under $10, income is not required to be reported to the government by the payor, not the recipient. In the case of interest, if you fail to report it when you do not receive a 1099-INT, the amount is so small that it would have little, if any affect on your taxe obligation.

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