SR Client Question: Is a salary advance taxable?
Some employers allow employees to request a salary advance, receiving their paycheck earlier than the standard payday. For example, if a paycheck is issued on the 1st of the month instead of the usual 15th, the advance received on the 1st is considered wages. This advance payment is treated as constructively received at the time it is made available to the employee.
Constructive receipt of wages occurs when they are credited to the employee’s account or set aside for them, allowing withdrawal at any time. Federal withholding tax, FICA tax and liability, FUTA liability, as well as state and local tax and liability, are determined based on the date the advance is paid.
For questions about salary advances and how to categorize them, contact a ShindelRock tax professional.