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Glitch for PTO banks: Constructive receipt

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in Office Management,Payroll Management

According to the results of a recent survey by Mercer, 63% of employers use paid time off banks, or PTO banks, up from 50% just four years ago. Before you take the leap into PTOs, two private letter rulings from the IRS may temper your enthusiasm for them by dredging up the dreaded concept of constructive receipt.

Note: Private letter rulings are intended as private advice from the IRS to the requesting party. They may be used for informational purposes only; they may not be used or cited as precedent.

PTO time is taxable, but when? PTO banks combine employees’ vacation, personal and sick leave. Most PTO arrangements allow employees to roll over their unused accrued time into the next year. Payroll issue: When is the value of leave taxed—when employees earn it, when they roll it over or when they take time off? The answer depends on whether the accrued leave is subject to constructive receipt.

CONSTRUCTIVE RECEIPT: Construct...(register to read more)

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