State Your Liability With Proof

As a full time tax preparer for a firm in Greensboro, NC, I see all kinds of omissions and mistakes on tax returns. Most of the cases that I work have not filed returns in years, some as many as six to ten years or more.

Most folks will keep their W-2s even if they don’t file a return for that year. But there are those who just simply discard them away. If you are one of those who do not see the monetary value of that form, let me give you some valuable information that could save you from double taxation, which can amount to thousands of dollars.

Employers who issue W-2s are required to report to the IRS your earnings and deductions (federal withholding, social security and medicare) each year. That is all that they are required to report.

The big misconception is that employers also report your State withholdings to the IRS. This is not the case.

There are only nine (9) States that actually track each individual taxpayer’s withholding contributions during the year. They are Delaware, Georgia, Louisiana, Maryland, Michigan, Minnesota, New York, Pennsylvania and West Virginia. These states track your payments from the quarterly deposits/payments made by the employer.

The remaining States leave the burden of proof on the taxpayer. And the proof is in the W-2 that you attach to your tax return each year when filing. If you do not have the proof then you are considered to have not withheld state taxes. You will then be taxed again on your earnings (double taxation) until you can provide adequate proof.

A W-2 is not the only proof that you can provide. Your final pay stub will also serve as adequate documentation.

If you have lost or misplaced your W-2 and you live in one of the states listed above, you can request a copy of your yearly withholding statement. And of course you can also go back to your employer and request a duplicate copy of your W-2.

Under estimating the importance of the W-2 can be detrimental to your State liability and can cost you thousands. There are thousands of delinquent filers who make that “assumption” each year and the individual States are lining their pockets with your hard earned money.

S. Raines, Sr. Financial Advisor/Tax Preparer