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I worked at a company for a few years who went out of business last year. My last pay check and severance pay check were not able to be cashed, totallingtotal is around $3k. It was an LLC that is legally dissolved, so I cannot go to any boards and demanding payment, etc.

Since I won't have a W2 from them, I'll have to file a separate form for the IRS. I'm assuming I will only include the income that I was able to cash from them, even though all taxes were (at least as it says on my pay stub) paid for on my last 2 checks.

Is anyone aware if there is any sort of write off for this money I lost by working and not receiving payment?

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Unfortunately, no. Think about the numbers. If you work for me, and I pay you $1000, you owe tax on $1000. If you still work, but I don't pay you, you have no tax due, but there's no benefit for you to collect for my stealing your time.

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  • This of course makes sense, but I did receive checks and pay stubs, stating that they paid taxes on my income (though its likely they didn't). Does that change anything?
    – user41430
    Jan 15, 2017 at 20:19
  • You may have to contest the W2 and file paperwork with the IRS to correct the amounts you actually received. It's possible they got paid taxes on money you weren't paid, in which case you will get that back from the IRS in your tax refund.
    – David Schwartz
    Jan 16, 2017 at 0:26
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If you don't receive a W2, there are 2 scenarios you should consider:

  1. The final checks should be treated as if they never existed. This means the amount listed as withholding on those checks was never actually paid to the IRS (and state if applicable).
  2. Even though the final checks bounced, the taxes withheld from them were still paid to the IRS (and state if applicable).

If you have reason to believe that scenario 1 is accurate, then you could file your taxes based on the last valid paycheck you received.

If you have reason to believe that scenario 2 is accurate, then you need to do some extra math, but fortunately it is straight forward. Simply treat your final paychecks as if the gross amount of your check was equal to the sum of your taxes paid, and the net amount of the check is $0. This way your income will increase by the proper amount, and you will still receive credit for the taxes paid. This should work out cleanly for federal and state taxes, but will likely result in an overpayment of FICA taxes. You can use form 843 to receive a refund of excess FICA taxes.

As a side note, I'd recommend spot checking the YTD numbers on your last paychecks against previous paystubs to make sure there wasn't any fuzzy math going on when they realized they were going out of business.

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