Legal Question in Business Law in Virginia

Re: Recover change in tax liability due to late payment?

This sort of thing is called "consequential damages" for a breach of contract, as opposed to direct damages (being, in your case, the agreed price). The law generally provides, in the absence of a specific contract term, that consequential damages are not recoverable unless the defendant is aware that they will likely occur in the event of a breach. So I doubt they would be recoverable here.

But talk to a tax professional, [WHICH I AM NOT!] as there may be a possibility that you could treat your Schedule C business on an accrual accounting basis, which would accrue this revenue in 2008. The downside would be that you pay tax on it in 2008 even if you don't get paid. BUT THIS IS NOT TAX ADVICE OR LEGAL ADVICE - JUST A SUGGESTION FOR AN AREA OF INQUIRY TO AN ACCOUNTANT OR TAX LAWYER.

Re: Recover change in tax liability due to late payment?

This will really depend on what your contract says, but it is unlikely. If there is language in the contract about costs of collection or the like, then you might be able to collect these extra costs.

Issues of the TIMING of payments and other actions under a contract can be tricky, because when people write contracts they rarely include deadlines or specify consequences if payments or actions are late. If payment is due, but there is no time limit or deadline specified, then technically it cannot be "late" (although December from a Summer job is obviously very slow payment). Is there anything in the contract about a late payment penalty or interest rate, etc.?

I would certainly try to discuss this with them. If they give you a check on December 31 you can claim this for your 2008 taxes even if you don't cash it until 2009. (The IRS has ruled that YOUR choice whether to cash or not cash a check does not change the fact that you received income. It is as good as cash.0

If they are having cash issues, I would watch this very closely to make sure you get paid at all! It might be better to sue now, then wait too long and get nothing (or get in line behind other creditors). Up to $15,000 you can file a claim in General District Court.

Would you have to wait until 2010 to sue for the extra $400? Yes, actually, I think you would. That is because you would only be GUESSING at how much more in taxes you have to pay. Many things could happen during the entire year of 2009, including changing jobs again, changes in the tax rates, etc., etc. So you would not have to wait until 2010 to sue. But you would not know how much money you have "lost" as a result of this until you know what your actual income is for 2009. You could file a claim in General District Court (if they are a corporation) or in small claims court. You don't have to wait. The judge might let you estimate the impact on your taxes. But the court might say that the dollar value you are using is speculative.