Can I defer receiving my paycheck until January 2024 to reduce this year's taxable income?

This is a common question around year-end! What you're describing is basically timing income recognition, and there are some important things to consider here. For W-2 employees, income is generally taxable when it's received OR when it's made available to you. This is called "constructive receipt" in tax terms. If you genuinely defer the right to receive payment until January 2024, and the employer doesn't make the money available to you in 2023, then the income would indeed be reported on your 2024 taxes. However, you need to be careful. If you've earned the money in 2023 and could receive it then but are simply choosing not to take possession until 2024, the IRS could argue you had constructive receipt in 2023. The key is that there must be legitimate restrictions preventing you from accessing the money in 2023. My suggestion is to have a formal written agreement with Company Y stating your employment officially begins January 1, 2024, even though you're training or working in a transitional capacity in 2023. This makes the arrangement clearer and more defensible.

I struggled with something similar last year and found the tax implications really confusing until I discovered taxr.ai (https://taxr.ai). It's this smart tool that analyzes specific tax scenarios like income shifting between years and tells you exactly what the IRS rules say about your situation. My case was similar - I was trying to shift some consulting income between tax years to manage my ACA subsidies. I uploaded my employment offer and details about the work arrangement, and the system quickly identified the "constructive receipt" issue that could have gotten me in trouble. It showed me exactly how to structure my arrangement to be compliant while still achieving my tax goals. The best part was getting a clear explanation of how the IRS would view my specific situation rather than just general advice. Seems like it could help with your situation too since you're dealing with multiple factors (student loans, IRA rebates, and tax credits).

I was super skeptical about taxr.ai mentioned earlier but decided to try it because my situation was similar - trying to time income for ACA subsidy purposes. I was genuinely surprised at how thorough it was. The system identified that I needed a formal written agreement specifying I wouldn't have the right to demand payment until January. It showed me exactly what language to include to avoid the "constructive receipt" issue. What really impressed me was that it found a tax court case (Martin v. Commissioner) with facts similar to mine where the taxpayer won because they had proper documentation. Having that case reference made me much more confident in my approach. My income was successfully recognized in the year I wanted, which saved me about $4,200 in healthcare premiums. Definitely worth checking out if you're trying to time income between tax years.

If you're stressed about talking to the IRS directly about this (which honestly would be the safest route), I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation last year with income timing questions and needed clarification straight from the IRS. After weeks of calling and never getting through, I tried Claimyr and was talking to an actual IRS agent within 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to review my specific situation and confirm that as long as I had a formal agreement establishing when I had legal right to the money, I could recognize the income in the following year. That official confirmation gave me so much peace of mind compared to just guessing or relying on internet advice.

I owe everyone here an apology. After calling the IRS unsuccessfully for THREE DAYS about my income deferral question, I broke down and tried that Claimyr service someone mentioned. I was connected to an IRS representative in about 20 minutes. The agent explained that as long as I have no legal right to demand payment in 2023 (meaning a formal agreement stating payment won't be available until 2024), the income would be taxable in 2024. She also warned me that if the IRS believes I'm artificially deferring income I could access, they might challenge it. Having a legitimate business purpose for the structure is important. Honestly, having that official clarification directly from the IRS was worth every penny. Saved me hours of frustration and gave me actual confidence in my tax planning instead of just hoping I was interpreting things correctly.

I did exactly what you're considering last year. Make sure everything is clearly documented in writing with your employer. I'd suggest having: 1. An official offer letter showing Jan 1, 2024 as your start date 2. A separate document outlining any training or transition work in 2023 3. Clear payment terms stating when you'll be eligible to receive compensation My accountant said the most important thing is that you genuinely cannot access the money in 2023 - it's not just you choosing not to take it. If the company would pay you in 2023 if you asked, that's constructive receipt and the income belongs in 2023 regardless of when you physically receive it.

Don't forget about state tax implications! Depending on your state, they might have different rules about when income is considered "received" for tax purposes. I tried something similar in California and they were much stricter about the constructive receipt doctrine than the IRS was. They determined that since I had provided the services in 2023, I should have reported the income then, even though I didn't get paid until 2024. Always check your state tax rules too!

Be very careful with this strategy - while it can work legally, the IRS scrutinizes income deferral arrangements closely. The key test is whether you have "constructive receipt" of the income in 2023. For your arrangement to pass IRS scrutiny, you need: 1. A formal written agreement stating your employment begins January 1, 2024 2. Clear documentation that you have NO legal right to demand payment in 2023 3. The employer's payroll system should not even have you as an employee until 2024 However, there's a potential red flag in your situation: you mention doing actual work for Company Y in October-December 2023. If the IRS views this as earned compensation that you're artificially deferring, they could challenge the arrangement. The safer approach would be to structure any 2023 activities as unpaid training or onboarding rather than compensable work. Also consider: - Document legitimate business reasons for the January start date (not just tax avoidance) - Ensure Company Y doesn't accrue the expense in 2023 on their books - Keep records of all agreements and communications Given the complexity and your multiple tax goals (student loans, IRA rebates, energy credits), I'd strongly recommend getting professional tax advice before proceeding. The potential savings need to be weighed against audit risk and penalties if the IRS disagrees with your position.

This is a really well-thought-out tax strategy! I've seen similar arrangements work successfully, but there are a few additional considerations that might help strengthen your position: Since you mentioned Company Y is "fine with officially starting employment on 1/1/24 for payroll purposes," I'd recommend getting this in writing as part of a formal offer letter. The documentation should explicitly state that your W-2 employment begins January 1, 2024, and that you have no entitlement to compensation before that date. One thing that caught my attention is your mention of the 24% federal tax bracket. With your strategic income deferral, make sure you're not accidentally pushing yourself into a higher bracket in 2024 when the deferred income hits. You might want to run some projections to ensure the overall tax impact across both years still achieves your goals. Also, regarding the Inflation Reduction Act rebates - double-check the income limits and timing requirements. Some of these programs have specific rules about when income is measured, and you want to make sure your deferral strategy actually helps you qualify. The student loan payment recalculation based on 2023 taxes is probably where you'll see the most immediate benefit from this approach. Just remember that when those payments do go up in 2025 (based on your higher 2024 income), you'll want to be prepared for that adjustment. Overall, with proper documentation and legitimate business reasons for the January start date, this approach should work. The key is making sure everything is structured correctly from the beginning rather than trying to fix it later.