Is there any sort of tax write off for unfulfilled pay checks?
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. If you don't receive a W2, there are 2 scenarios you should consider: 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.
Honestly its their job to pay as little in taxes as possible.  Its like any normal person who writes off work clothes as a tax deductible. Might as well do everything youre legally able to do.  The government leaves tax loopholes in the tax code, they know they are there, take advantage, lord knows your competitors are. "This is somewhat unbelievable.  I mean if you had a business of collecting debts, wouldn't you want to collect said debts?  Rather than attempting to browbeat people with these delinquent debts into paying, you have someone volunteering to pay.  Would you want to service that client?  This would not happen in just about any other industry, but such is the lunacy of debt collecting. The big question is why do you need this cleared off your credit?  If it is just for a credit score, it probably is not as important as your more recent entries.  I would just wait it out, until 7 years has passed, and you can then write the reporting agencies to remove it from your credit. If you are attempting to buy a home or similarly large purpose and the mortgage company is insisting that you deal with this, then I would do the following: Write the company to address the issue.  This has to be certified/return receipt requested.  If they respond, pay it and insist that it be marked as paid in full on your credit.  I would do this with a money order or cashiers check.  Done. Dispute the charge with the credit reporting agencies, providing the documentation of no response.  This should remove the item from your credit. Provide this documentation to the mortgage broker.  This should remove any hangup they might have. Optional:  Sue the company in small claims court.  This will take a bit of time and money, but it should yield a profit.  There was a post on here a few days ago about how to do this.  Make part of any settlement to have your name cleared of the debt. It is counterproductive to fall into the trap of the pursuit of a perfect credit score.  A person with a 750 often receives the same rate options as a person with 850.  Also your relationship with a particular lender could trump your credit score. Currently I am ""enjoying"" the highest credit score of my life, over 820.  Do you know how I did it?  I got out of debt (including paying off the mortgage) and I have no intentions of ever going into debt for anything.  So why does it matter?  It is a bit ridiculous." "Somehow I just stumbled onto this thread...  &gt; You essentially robbed the person holding the debt (since you promised to pay it off).   Depends on leverage, with fractional reserve lending.  Banks are permitted to loan out 30x their actual assets, or more.  If I have $1 but can loan out $30, and anything more than $1 gets paid back, I haven't lost any money.  In addition, I can write off the amount defaulted, *and the government will pay me back* for certain types of loans.  With student loans, since they are almost impossible to discharge, gov't will pursue the borrower for years and decades, and ultimately collect more interest.  Here is an article on it:  http://online.wsj.com/article/SB10001424052748704723104576061953842079760.html  &gt; According to Kantrowitz, the government stands to earn $2,010.44 more in interest from a $10,000 loan that defaulted than if it had been paid in full over a 20-year term, and $6,522.00 more than if it had been paid back in 10 years. Alan Collinge, founder of borrowers' rights advocacy Student Loan Justice, said the high recovery rates provide a ""perverted incentive"" for the government to allow loans to go into default. Kantrowitz estimates the recovery rate would need to fall to below 50% in order for default prevention efforts to become more lucrative than defaults themselves.   Not to mention:  http://studentloanjustice.org/defaults-making-money.html  &gt; So essentially, the Department is given a choice:  Either do nothing and get nothing, or outlay cash with the knowledge that this outlay will realize a 22 percent return, ultimately (minus the governments cost of money and collection costs).  From this perspective, it is clear that based solely on financial motivations, and without specific detailed knowledge of the loan (i.e. borrower characteristics, etc.), the chooser would clearly favor the default scenario,  for not only the  return, but perhaps the potential savings in subsidy payment as well,     And don't forget the penalties accruing to the person defaulting; they will probably have to move out of the country in order to escape collection.  And let's factor in the huge ROI the lender sees by creating an indentured servant class.  Plus, the gov't will issue as much currency as it wants, to make *itself* whole.  And how much of a loss IS the loss, when the whole of the loan amount went right back into the local economy, paying professors, janitors, landlords, grocery stores, etc.?  And don't forget all THOSE taxes (income and sale) that the gov't collects.  Government will collect ~30%-50% of the loan immediately as income and sales tax, plus a portion of it every time the money changes hands (I pay income tax, then use some of my after-tax money to pay you for a product or service, and you still have to pay tax on that money, and so on).  So it's more complicated than having ""robbed the person holding the debt"".  Banks at 30x leverage don't lose money as long as they get back 1/30th of the total amount lent out, including interest, fees, and penalties, before considering write-offs and government repayment.  In fact, the point of over-leverage is so you CAN make loans that have risk attached.  If you could only lend what you actually had, you would have to stay away from anything risky because it would be too easy to lose money.  Having virtual $ to bet means you can serve market segments that have higher risk.  This makes MORE money for the banks, that's why they do it.  They are already playing with funny money, so they don't lose any even if you default and move to another country.  And the money you ""spent"" has also made its way back to them in various amounts, such as your professor's mortgage payments, auto loan, etc.  Your taking on debt already helped the bank get its OTHER loans repaid.  So, roughly speaking, if you took out $90,000 and $3,000 of that made its way back to the bank through various means, they haven't lost any money, because it only cost them $3,000 actual dollars in the first place." Yes, this extra income would be taxed at your marginal rate because it is increasing your total income. This does not necessarily apply to all income, however. Capital gains are taxed at a different rate. Depending on the amount of extra work, you may wish to consider setting up a corporation. Corporations are taxed entirely differently. This would also give you the opportunity to write off far more of your expenses, but be aware of double taxation. Investopedia has a good article on double taxation. The issue is that the corporation must pay taxes on the revenue and then, when you take out the money either as salary or dividends, you personally will pay tax. It may leave you better off, even with the double taxation. Dividends are taxed at a lower rate than your marginal tax rate, generally. And you can write off much more inside a corporation. If considering this, talk to an accountant and discuss your expected revenue from consulting. The accountant should be able to quantify the costs and benefits. 75k is short of the 'highly compensated' category.  Most US citizens in that pay range would consider paying someone to do their taxes as an unnecessary expense.  Tax shelters usually don't come into play for this level of income.  However, there are certain things which provide deductions. Some things that make it better to pay someone:   Use the free online tax forms to sandbox your returns.  If all you're concerned about is ensuring you pay your taxes correctly, this is the most cost efficient route. If you want to minimize your tax burden, consult with a CPA.  Be sure to get one who is familiar with resident aliens from your country and the relevant tax treaties. The estimate you're looking at may be the withholding, of which you may be eligible for a refund for some part of that withholding.   Tax treaties likely make sure that you get credit on each side for the money paid in the other.  For example, as a US citizen, if I go to Europe and work and pay taxes there, I can deduct the taxes paid in Europe from my tax burden in the US.  If I've already paid more to the EU than I would have paid on the same amount earned in the US, then my tax burden in the US is zero.  By the same token, if I have not paid up to my US burden, then I owe the balance to the US.  But this is way better than paying taxes to your home country and to the host country where you earned the money. I assume the OP is the US and that he is, like most people, a cash-basis tax payer and not an accrual basis tax payer. Suppose the value of the rental of the unit the OP is occupying  was reported  as income on the OP's 2010 and 2011 W-2 forms but the corresponding income  tax was not withheld.  If the OP correctly transcribed these income numbers onto his tax returns, correctly computed the tax on the income reported on his 2010 and 2011 1040 forms, and paid the amount due in timely fashion,  then there is no tax or penalty due for 2010 and 2011. Nor is the company entitled to withhold tax on this income for 2010 and 2011 at this time; the tax on that income has already been paid by the OP directly to the IRS and the company has nothing to do with the matter anymore. Suppose the value of the rental of the unit the OP is occupying  was NOT reported as income on the OP's 2010 and 2011 W-2 forms.  If the OP correctly transcribed these income numbers onto his tax returns, correctly computed the tax on the income reported on his 2010 and 2011 1040 forms, and paid the amount due in timely fashion,  then there is no tax or penalty due for 2010 and 2011. Should the OP have declared the value of the rental of the unit as additional income from his employer that was not reported on the W-2 form, and paid taxes  on that money? Possibly, but it would be reasonable to argue that the OP did nothing wrong other than not checking his W-2 form carefully: he simply assumed the income numbers included the value of the rental and copied whatever the company-issued W-2 form said onto his 1040 form. At least as  of now, there is no reason for the IRS to question his 2010 and 2011 returns because the numbers reported to the IRS on Copy A of the W-2 forms match the numbers reported by the OP on his tax returns.    My guess is that the company discovered that it had not actually declared the value of the rental payments on the OP's W-2 forms for 2010 and 2011 and now wants to include this amount as income on subsequent W-2 forms. Now, reporting a lump-sum benefit of $38K (but no actual cash)  would have caused a huge amount of income tax to need to be withheld, and the OP's next couple of paychecks might well have had zero take-home pay as all the money was going towards this tax withholding. Instead, the company is saying that it will report the $38K as income in 78 equal installments (weekly paychecks over 18 months?)  and withhold $150 as the tax due on each installment. If it does not already do so, it will likely also include the value of the current rent as a benefit and withhold tax on that too. So the OP's take-home pay will reduce by $150 (at least) and maybe more if the current rental payments also start appearing on the paychecks and tax is withheld from them too. I will not express an opinion on the legality of the company withholding an additional $150 as tax from the OP's paycheck, but will suggest that the solution proposed by the company (have the money appear as taxable benefits over a 78-week period, have tax withheld, and declare the income on your  2012, 2013 and 2014 returns) is far more beneficial to the OP than the company declaring to the IRS that it made a  mistake on the 2010 and 2011 W-2's issued to the OP, and that the actual income paid was higher. Not only will the OP have to file amended returns for 2010 and 2011 but the company will need to amend its tax returns too. In summary, the OP needs to know that He will have to pay taxes on the value of the waived rental payments   for 2010 and 2011. The company's mistake in not declaring this as income to the OP   for 2010 and 2011 does not absolve him of the responsibility   for paying the taxes What the company is proposing is a very reasonable solution to the   problem of recovering from the mistake. The alternative, as @mhoran_psprep points out, is to amend   your 2010 and 2011 federal and state tax returns to declare the   value of the rental during those years as additional income,   and pay taxes (and possibly penalties) on the additional   amount due. This takes the company completely out of the picture,   but does require a lot more work and a lot more cash now rather   than in the future. According to this section in Publication 15:  Collecting underwithheld taxes from employees.   If you withheld no   income, social security, or Medicare taxes or less than the correct   amount from an employee's wages, you can make it up from later pay to   that employee. But you’re the one who owes the underpayment.   Reimbursement is a matter for settlement between you and the employee.   [...] it seems that if the employer withheld less than the correct amount of FICA taxes from you, it is still the employer who owes your FICA taxes to the government, not you. I do not believe there is a way for you, an employee (not self-employed), to directly pay FICA taxes to the government without going through the employer. The employer can deduct the underwithheld amount from you future paychecks (assuming you still work for them), or settle it with you in some other way. In other words, you owe the employer, and the employer owes the government, but you do not directly owe the government. If they do deduct it from your future pay, then they can issue a corrected W-2, to reflect the amount deducted from you. But they cannot issue a corrected W-2 that says FICA were deducted from you if it wasn't. The best thing you can do here is work with the IRS to the best of your ability.  You can attempt to call them, attempt to go to one of their local branches in your area, or just hire an accountant to solve the problem.  Just be mentally prepared to write a check.   You could attempt to figure this all our yourself, but then a lot of tax law is open to interpretation.  This is why I would recommend seeking the IRS's help if you DIY.  Once you have addressed the issue to the satisfaction of the IRS agent, this will no longer be a problem.  Provided you have a good attitude (which you express in your question) and are honest, I have found them very easy to work with.  You will be a refreshing change of pace to the actual tax cheats. While I understand that you are not seeking advice on what got you your situation, I would like to offer some encouragement.  Good for you for learning from, and addressing your mistakes.  Doing this will serve you well in the future.