Author Topic: Last paycheck  (Read 2751 times)

FLJOEL

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Last paycheck
« on: November 17, 2020, 07:30:56 AM »
I get paid every two weeks and plan to put in notice on the 14th of December. However I will get paid my "final" paycheck on the 4th or 11th. Any accountants out there know if this is cash or accrual based? In other words will it count toward my 2020 earnings or 2021?

Thanks,
Joel

By the River

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Re: Last paycheck
« Reply #1 on: November 17, 2020, 07:42:02 AM »
I get paid every two weeks and plan to put in notice on the 14th of December. However I will get paid my "final" paycheck on the 4th or 11th. Any accountants out there know if this is cash or accrual based? In other words will it count toward my 2020 earnings or 2021?

Thanks,
Joel

If you mean you get your last check on January 4th or 11th, then it counts as 2021 earnings.  Cash basis for individuals. 

FLJOEL

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Re: Last paycheck
« Reply #2 on: November 17, 2020, 07:45:13 AM »
Thanks! I was hoping someone would say that! I have to quit early!!! :)

Cheers!
-Joel

NYExpat

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Re: Last paycheck
« Reply #3 on: November 18, 2020, 12:05:59 PM »
Are you FIRE, or just making a switch?  Either way congrats.  Does it really mess up your plans to get paid in January?

rantk81

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Re: Last paycheck
« Reply #4 on: November 19, 2020, 06:34:43 AM »
Are you FIRE, or just making a switch?  Either way congrats.  Does it really mess up your plans to get paid in January?

It very well could muck with ACA subsidy eligibility.

Ricksun

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Re: Last paycheck
« Reply #5 on: November 19, 2020, 06:49:49 AM »
100% contribution to your 401k?  Can't remember is that exempts it from ACA subsidies?? 

Much Fishing to Do

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Re: Last paycheck
« Reply #6 on: November 19, 2020, 06:57:23 AM »
100% contribution to your 401k?  Can't remember is that exempts it from ACA subsidies??
Thats a good idea, pre-tax retirement contributions do reduce income for ACA purposes.  Also HSA contributions if available can do this as well, and unlike retirement contributions that is something that you can continue even after earned income ends.

Proud Foot

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Re: Last paycheck
« Reply #7 on: November 19, 2020, 09:35:59 AM »
I am not sure on the ACA subsidy part but remember that you might also be able use this income to make a contribution to an IRA. Depending on your employer's policies your PTO payout may not be eligible for 401k contributions. 

Wintergreen78

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Re: Last paycheck
« Reply #8 on: November 19, 2020, 02:46:28 PM »
I left my last job at the beginning of the year three years ago.  My ACA benefit was actually calculated on my monthly income after I quit, so my benefit was not impacted by receiving a paycheck after the new year. Also, I maxed out my retirement account contributions in my paychecks, so my taxable income that year was almost zero.

bmjohnson35

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Re: Last paycheck
« Reply #9 on: November 19, 2020, 05:29:45 PM »
I left my last job at the beginning of the year three years ago.  My ACA benefit was actually calculated on my monthly income after I quit, so my benefit was not impacted by receiving a paycheck after the new year. Also, I maxed out my retirement account contributions in my paychecks, so my taxable income that year was almost zero.

This is the first I have heard of this.  Is this the standard?  Could it vary by state?


Wintergreen78

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Re: Last paycheck
« Reply #10 on: November 19, 2020, 08:10:52 PM »
I’m in California. It seemed odd to me, and I didn’t see anything in writing that explained it clearly. I only found it out when I applied on-line. I wouldn’t be surprised to learn that different states implement it differently.

rantk81

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Re: Last paycheck
« Reply #11 on: November 20, 2020, 06:59:23 AM »
Well... I don't know specifics for California, but my understanding is:

ACA is a federal law.  The subsidies are calculated as part of your federal tax return.  So if you receive premiums subsidies far in excess of what you're entitled to (based on your MAGI in that tax year), the federal tax code has provisions that will claw it back part, or all of the value of the subsidy -- based on income level.

bmjohnson35

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Re: Last paycheck
« Reply #12 on: November 20, 2020, 07:48:43 AM »

I quit work at the end of February.  I used the income during that period to forecast my MAGI for the year.  If it doesn't count, I would likely fall below my minimum income required to qualify.  If Jan/Feb income is not included, I could easily make up the necessary income before the end of the year.  On the other hand, if I pull out extra income and Jan/Feb is included, I would end up making too much income.  I will touch base with my agent and call the healthcare.gov to see if I can get a definitive answer.

 

Wow, a phone plan for fifteen bucks!