What to Do If You Are Missing a W-2

Did you get your W-2? These documents are essential to filling out most individual tax returns. You should receive a Form W-2, Wage and Tax Statement, from each of your employers each year. Employers have until February 2, 2009 to provide or send you a 2008 W-2 earnings statement either electronically or in paper form. If you haven’t received your W-2, follow these steps:

1. Contact your employer. If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS. If you still do not receive your W-2 by February 17th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:
Employer's name, address, city, and state, including zip code;
Your name, address, city and state, including zip code, and Social Security number; and
An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return. You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X. On occasion, you may receive your missing documents at a later date and some may have conflicting information. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Form 4852, Substitute for Form W-2, Wage and Tax Statement (PDF 29K)
Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)
Instructions for Form 1040X (PDF 43K)

Age Discrimination Settlements Can Be Taxable

An example of such taxability can be found in the Tax Court Memo 2008-87. Michael Petit worked for Electronic Data Systems (EDS) until March 5, 2002, when he was terminated as a result of workforce reduction. The forty-seven-year-old was told that he was selected for the termination based on his age and salary. Subsequent to the workforce reduction, EDS hired a younger replacement. As a result, Mr. Petit sued EDS for age discrimination.

After the third day of trial, Mr. Petit and EDS decided to settle matters out of court. EDS agreed to pay its former employee $240,000. In 2003, EDS paid him half the settlement. The settlement provided that $44,250 was attributed to lost wages and was reported to Mr. Petit on Form W-2. The remainder of the payment was for “emotional distress, pain and suffering, and other non-wage damages.” EDS issued Mr. Petit Form 1099-Misc to report this payment.

On his timely filed Form 1040, Mr. Petit properly reported the W-2 as wages. On Line 21 (other income), he included the amount reported to him on Form 1099-Misc. However, he also entered the same amount as a negative “zero out” that portion of the legal settlement. He claimed that portion of the settlement was excludable under §104(a) specifically states that emotional distress is not to be treated as physical injury or sickness. The term “emotional distress” includes symptoms that result from emotional distress.

Even though Mr. Petit experienced headaches and irritable bowel syndrome as a result of the emotional distress stemming from his wrongful termination and the lawsuit, the amounts he received as compensation for this are not excludable. He was required to pay the tax on his tax deficiency. However, the court did not uphold the accuracy-related penalty because he acted with reasonable cause and in good faith.

The downsizing trend of companies seems to be devaluing the experience and knowledge of its older employees and relying on the inexperience of the younger generation to successfully run their businesses. How quickly these companies forget the hard work, loyalty and success its older employees have provided. This writer believes that older employees provide a greater value that seems to be lost in the employment marketplace.

Tax Debt Help - Form W-2 Box 12 Codes

Form W-2 Box 12: Deferred Compensation and Other Compensation. There are several types of compensation and benefits that can be reported in Box 12. Box 12 will report a single letter or double letter code followed by a dollar amount. Here are the codes for Box 12:

• Code A – Uncollected Social Security or RRTA tax on tips. Include this amount as part of your total tax on Form 1040.
• Code B – Uncollected Medicare tax on tips. Include this amount as part of your total tax on Form 1040.
• Code C – Taxable benefit of group term-life insurance over $50,000. Already included as part of your taxable wages in Boxes 1, 3, and 5.
• Code D – Non-taxable elective salary deferrals to a 401(k) or SIMPLE 401(k) retirement plan.
• Code E – Non-taxable elective salary deferrals to a 403(b) retirement plan.
• Code F – Non-taxable elective salary deferrals to a 408(k)(6) SEP retirement plan.
• Code G – Non-taxable elective salary deferrals and non-elective employer contributions to a 457(b) retirement plan.
• Code H – Non-taxable elective salary deferrals to a 501(c)(18)(D) tax-exempt plan.
• Code J – Non-taxable sick pay. This amount is not included in taxable wages in Boxes 1, 3, or 5.
• Code K – Excise tax (equal to 20%) on excess "golden parachute" payments. Include this amount as part of your total tax on Form 1040.
• Code L – Non-taxable reimbursements for employee business expenses.
• Code M – Uncollected Social Security or RRTA tax on taxable group term life insurance over $50,000 for former employees. Include this amount as part of your total tax on Form 1040.
• Code N – Uncollected Medicare tax on taxable group term life insurance over $50,000 for former employees. Include this amount as part of your total tax on Form 1040.
• Code P – Non-taxable reimbursements for employee moving expenses, if the amounts were paid directly to the employee.
• Code Q – Non-taxable combat pay. Some individuals may elect to include combat pay when calculating their Earned Income Credit.
• Code R – Employer contributions to an Archer Medical Savings Account. This amount should be reported on IRS Form 8853.
• Code S – Non-taxable salary deferral to a 408(p) SIMPLE retirement plan.
• Code T – Employer paid adoption benefits. This amount is not included in Box 1 wages. You must use IRS Form 8839 to calculate the taxable and non-taxable portion of these adoption benefits.
• Code V – Income from the exercise of non-statutory stock options. This amount is already included as taxable income in Boxes 1, 3, and 5. See also, how to report stock options.
• Code W – Employer contributions to your Health Savings Account. Report this amount on IRS Form 8889.
• Code Y – Salary deferrals under 409A non-qualified deferred compensation plan.
• Code Z – Income received under 409A non-qualified deferred compensation plan. This amount is already included in taxable wages in Box 1. This amount is subject to an additional tax of 20% plus interest as part of your total tax on Form 1040.
• Code AA – After-tax contributions to a Roth 401(k) retirement plan.
• Code BB – After-tax contributions to a Roth 403(b) retirement plan.

Tax Tip – If you have any amounts reported in Box 12, it may be quicker and more efficient to use tax preparation software to calculate your taxes.

S. Raines, Sr. Financial Advisor/Tax Preparer

Tax Debt Help - Understanding Your W-2

Box 1: Wages, tips, and other compensation. Box 1 reports your total taxable wages for federal income tax purposes. This figure includes your wages, salary, tips you reported, bonuses, and other taxable compensation. Any taxable fringe benefits (such as group term life insurance) are also included in your Box 1 wages.

Box 2: Federal income tax withheld. Box 2 reports the total amount withheld from your paychecks for federal income taxes. This represents the amount of federal taxes you have paid-in throughout the year.

Box 3: Social Security wages. Box 3 reports the total amount of wages subject to Social Security taxes. For 2005, the Social Security tax is assessed on wages of $90,000 or less. If Box 3 shows an amount over $90,000, you will need to have your employer correct your W-2. If your total wages are under $90,000, then the amounts reported in Boxes 1 and 3 should be the same. Tips reported to your employer are not included in the Box 3 amount. Tip income is reported in Box 7. The amounts in Box 3 and Box 7 should equal either the amount in Box 1 or the $90,000 maximum wage base for Social Security taxes.

Box 4: Social Security tax withheld. Box 4 reports the total amount of Social Security taxes withheld from your paychecks. The Social Security tax is a flat tax rate of 6.2% for wages up to a maximum of $90,000. Wages above $90,000 are not subject to the Social Security tax. The maximum figure shown in Box 4 should be $5,580 ($90,000 maximum wage base times 6.5%). If you have two or more jobs during the year, and your total wages exceed $90,000, you may have excess Social Security taxes paid-in. You will claim the excess as a refund on Form 1040, Line 67.

Box 5: Medicare wages and tips. Box 5 reports the amount of wages subject to Medicare taxes. There is no maximum wage base for Medicare taxes. The amount shown in Box 5 may be larger than the amount shown in Box 1. Medicare wages includes any deferred compensation, 401k contributions, or other fringe benefits that are normally excluded from the regular income tax.

Box 6: Medicare tax withheld. Box 6 reports the amount of taxes withheld from your paycheck for the Medicare tax. The Medicare tax is a flat tax rate of 1.45% of your total Medicare wages.

Box 7: Social Security tips. Box 7 reports the amount of tip income that you reported to your employer. If you did not report tips to your employer, you will not have an amount in this box. The amounts in Box 7 and Box 3 should add up to the amount in Box 1, or the $90,000 maximum wage limit for Social Security taxes.

Box 8: Allocated tips. Box 8 reports any tip income that your employer thinks you may have earned, but failed to report. This amount is not included in the wages reported in Boxes 1, 3, 5, or 7. Instead, you must add this to your taxables wages on Form 1040 Line 7, and must calculate your Social Security and Medicare taxes on this tip income using IRS Form 4137 (PDF). Taxpayers with any amount shown in Box 8, Allocated Tips, should seek the advice of a tax preparer to figure out the best strategy for handling this situation. Employees with allocated tips must file Form 1040.

Box 9: Advance EIC payment. Box 9 reports any advance against your Earned Income Tax Credit paid to you by your employer. This only happens if you submitted IRS Form W-5 (PDF) requesting your employer to add a portion of your anticipated EIC to your paycheck. Advance EIC payments are repaid on Form 1040 as an additional tax payment, where it offsets the total amount of EIC you will receive as a tax refund. Employees with advance EIC payments must file Form 1040A or Form 1040.

Box 10: Dependent Care Benefits. Box 10 reports any amounts reimbursed for dependent care expenses, or the dollar value of dependent care services provided by your employer. Amounts under $5,000 are non-taxable benefits. Any amount over $5,000 is reported as taxable wages in Boxes 1, 3, and 5. Non-taxable benefits must be excluded from expenses claimed for the child and dependent care tax credit on IRS Form 2441 (PDF).

Box 11: Nonqualified Plans. Box 11 reports any amounts distributed to you from your employer's non-qualified deferred compensation plan or non-government Section 457 pension plan. The amount in Box 11 is already included as taxable wages in Box 1.

Box 12: Deferred Compensation and Other Compensation. There are several types of compensation and benefits that can be reported in Box 12. Box 12 will report a single letter or double letter code followed by a dollar amount. Here are the codes for Box 12.

Box 13: Check the Box. There are three check boxes in Box 13. Boxes will be checked off if any of these situations apply to you as an employee. Statutory employee means that you must report the wages from this W-2 (and any other W2 forms marked "statutory employee") on Form 1040 Schedule C. Your wages are not subject to income tax withholding (there will be a zero or blank amount in Box 2), but are subject to Social Security and Medicare taxes (so Boxes 3 through 6 will be filled out). Statutory employees are strongly urged to use tax preparation software to calculate their taxes. Retirement plan means that you participated in your employer's retirement plan during the year. This might be a 401k plan, profit-sharing plan, or pension plan. As a participate in a retirement plan, your ability to contribute to a tax-deductible traditional IRA may be limited. Third-party sick pay means that you received sick pay under your employer's third-party insurance policy. (Instead of receiving sick pay directly from your employer as part of your regular paycheck.) Sick pay is not included in your taxable wages.

Box 14: Other Tax Information. Your employer may report additional tax information in Box 14. If any amounts are reported, they will have a brief description of what the amounts are for. For example, union dues, employer-paid tuition assistance, health insurance premiums you paid, or after-tax contributions to a retirement plan will be reported here. Some employers report certain state and local taxes in Box 14, such as State Disability Insurance (SDI) premiums.

Box 15: State and State Employer's Identification. Box 15 reports your employer's state and state tax identification number. If you worked for the same employer in multiple states, there may be multiple lines of information.

Box 16: State wages. Box 16 reports the total amount of taxable wages earned in that state. If you worked for the same employer in multiple state, there may be multiple lines of information.

Box 17: State income tax withheld. Box 17 reports the total amount of state income taxes withheld from your paychecks for the wages reported in Box 16.

Box 18: Local wages. Box 18 reports the total amount of wages subject to local, city, or other state income taxes.

Box 19: Local income tax withheld. Box 19 reports the total amount of taxes withheld from your paychecks for local, city, or other state income taxes.

Box 20: Locality name. Box 20 provides a brief description of the local, city, or other state tax being paid. The description may identify a particular city, or may identify a state tax such as State Disability Insurance (SDI) payments.

S. Raines, Sr. Financial Advisor/Tax Preparer