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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4474
Experience:  35 years tax experience, including four years at a Big 4 firm.
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Can an employee, without going to labor board, filing an

Customer Question

Can an employee, without going to labor board, filing an action etc, have a lien against his employer for back salary owed (with permission of employer). ....or, is there a tax consequence from securing note that is comprised with unpaid salary? If there
is a tax consequence, based on a valuation of the company's ability to pay, can a discount be taken on what's owed such that taxes aren't at the full amount?
Submitted: 2 years ago.
Category: Tax
Expert:  PDtax replied 2 years ago.
Hi again.Customerhere.
An agreement between employee and employer for back pay secured by a note does not create taxable income for the employee until payments are made (employee is cash basis). The employer likely does not get a deduction for the agreement until payments are made, but could.
This assumes the employee is not a related party to the employer.
Thanks again from just answer. I'mCustomer
Customer: replied 2 years ago.
When/if the employer starts paying on it, is he paying as salary or as paying down a note. Would it be w-2, 1099 or something else?
Can interest be charged?
The person is not related, but is the CEO that originally founded the company many years ago. There are many shareholders.
Expert:  PDtax replied 2 years ago.
I wish you had mentioned the CEO thing first. Former CEOs get special tax treatment. That changes things.
Executive compensation is a tax practice area of its own. Termination packages, back pay to settle buyouts, stock buyouts, deferred compensation, office space, health care, stock option buyouts, can all be part of the arrangement you might be working on.
I can't do your question justice without knowing more about the arrangement, what was given up, the deal struck, etc. A copy of the agreement and some consulting time is appropriate here.
I will make an Offer to assist, but the issues involved and complexity are as yet unknown. I will offer you 1 hour of consulting, which should be enough to review the agreement or help draft it.
I'm sorry I can't finish this for the price posted.
Customer: replied 2 years ago.
I need to think on this. I don't know if this changes things, worse or better, but it's the current CEO working for the financially strapped company.
Expert:  PDtax replied 2 years ago.
It does. Please let me know tomorrow.
Expert:  PDtax replied 2 years ago.
Hi again.Customerhere.
I made an Offer of consulting time five days ago. As next week is busy here, and we're short with people taking vacation, I will be available Tuesday afternoon only if you want to accept my Offer. Otherwise, I will not be able to assist until next week.
Expert:  PDtax replied 2 years ago.
Since I didn't hear from you, I must, reluctantly, opt out of your question.
Other experts will be able to review your question and advise.