Employer refuses to issue corrected W-2

[manyhappyreturns]

What recourse does an employee have when the W-2 info is wrong but the employer won't issue a corrected one? The employee's federal and state income tax withholdings are way understated on the W-2, although the employer insists the amounts are correct. She (the employee) saved all her pay stubs and has all the info on an Excel spreadsheet, and yes, the info on the W-2 is wrong. If she files her return with the bogus W-2, she will get a very small refund, and she needs the money because she is now unemployed.

[geekgirldany]

A Form 4852 will need to be filed.

http://www.irs.gov/pub/irs-pdf/f4852.pdf

Is she still working for the employer? If so I would recommend that she takes her stubs and worksheet and show them. If not then a 4852 will have to be filed. If you haven't already done so double check the stubs and worksheet she has before preparing it.

[Koss]

Incorrect Form W-2

The short answer is that she can use Form 4852, Substitute for Form W-2, Wage and Tax Statement.

This form has developed a bad reputation because of its use by unscrupulous storefront tax preparers to file returns for employees who are still waiting for Form W-2. The form can in fact be used in cases where the employer has failed to issue Form W-2. But you can't do that on January 29. Or on February 1.

The form is also used in cases where the employer has issued an incorrect Form W-2. It says this right on the form, on line 4.

Good luck trying to file it electronically in the current environment. Whether filed electronically or on paper, it is likely to delay the taxpayer's refund.

Your client has other options available to her. Your client could:

(i) file a complaint with US Department of Labor, or the Department of Labor of your state;
(ii) File suit in small claims court for the amount of the missing tax withheld, and/or
(iii) talk to the economic crimes unit of the local police department, or the local prosecutor's office.

The pay stubs are prima facie evidence that the Form W-2 is wrong. By any measure of common sense, it shifts the burden to the employer to either correct the error, or offer a coherent explanation as to why the employer believes there is no error. If the employer won't do either, then it may rise to the level of fraud or embezzlement.

The idea, of course, is not to have the employer charged with a crime. A visit from a detective holding copies of the W-2 and the pay stubs might knock some sense into him.

Assume for the moment that the employer is not a sole proprietor. If your client files suit in small claims court, the employer probably will not be able to represent himself. In most states, a business entity must be represented by an attorney--even in small claims court. And that includes single-member LLCs. It may be a sole prop under the Internal Revenue Code, but under state law, it is a legal entity, and it can't appear in court without a lawyer.

The employer may well come to his senses when he gets the summons and complaint.

Questions:

Does your client know whether other employees are getting screwed like this?

Does your client still work there?

And what state are you in?

I know a couple lawyers that would love to take that kind of case, especially if there are multiple employees who are affected. I've served as an expert witness and consultant in cases like that. We drilled 'em a second a***ole.

BMK

[manyhappyreturns]

No, she's not working there anymore, because she says she couldn't deal with they way they do things, and this refusal to issue a valid W-2 seems to be another one of their antics. At first they sent her a 1099-Misc for the gross amount even though they had withheld taxes from her paychecks all along. In order to get a W-2 instead, I called the employer on her behalf a couple of weeks ago because she said she didn't want to have any contact with them at all. Just the thought of it causes her to look visibly shaken. So there's no way she will consent to taking her stubs and spreadsheet to them, so I guess I should meet with her and make sure we have all the numbers correct and then file the 4852. THANK YOU!

[taxea]

The paystubs and spreadsheet can be pdf'd then attached to the return. The sub-W2 should include a statement that the withholding on the employer W-2 is incorrect and the employer refuses to correct it. Can you get the in writing on their business letterhead. This should also be pdf'd and attached to the return. Perhaps you or the client could request a corrected w-2 via email to the payroll dept. If they respond with a refusal you will have the documentation you need to prove the refusal to the IRS.

The last line of the sub w2 explanation should include "see pdf attachments". I am really curious to see whether attaching documenting pdfs get looked at before the IRS sends any notices this year. I rather doubt it so it would be an asset to have these documents in your client file in anticipation of the IRS notice.

I believe in "where there's a will, there's a way"

[David1980]

Good luck trying to file it electronically in the current environment. Whether filed electronically or on paper, it is likely to delay the taxpayer's refund.

Maybe. All the IRS receives when you e-file a tax return with a substitute W-2 is a W-2 with the non-standard indicator. Same indicator you'd use if the W-2 was handwritten. They don't have anyway to differentiate a substitute from other non-standard W-2 (well, not until they match up forms later in the year.)

[FEDUKE404]

Trying to get to the facts

Interesting situation.

It would appear this problem is more of willful intent versus an honest error.

As Koss noted, Form 4852 should resolve things. You will definitely need accurate/legible "pay stubs" to document the corrected information.

Sadly, the client may be waiting a LONG time to see any refund. I have no idea how these forms are now processed...may even require paper filing?? FWIW: You could always revert to Plan B and file the return now using the "wrong" W2, and then straighten things out later via a Form 1040X with Form 4852 et al. But I would be very careful as to "known facts" before I went that route...

Item of note: OP mentioned there was also some (improper?) Form 1099-MISC pay from the same payer rattling around. The presence of that in the mix could really create additional unexpected problems, especially as related to what specifically they "withheld" from that pay.

Another possibility: Did the business possibly change ownership, therefore two separate W2s (EIN issues) for the "same" business?

Finally, is this client perhaps a hair stylist?

FE

[JohnH]

Interesting situation.

Finally, is this client perhaps a hair stylist?

FE

Tacky...

Something else we have in common, I'm afraid...

[Uncle Sam]

Wrong W-2

Sure - the 4852 fixes the discrepancy problem - but is the return e-fileable?

I don't know the answer to this - right or wrong - but in order to have matching information, would it be
advisable to input the W-2 as submitted, include 4852 which I don't believe is an e-fileable form, and
list the changes wherever they go to adjust to what they should be?

Then you also need to consider how this will effect the state return, as NY provides a comparable 4852
form - but it's not e-fileable.

[FEDUKE404]

Legit comment

Tacky...

Something else we have in common, I'm afraid...

Actually, not really.

Over the years I've had to deal with several barbers/hairstylists (no known verbalized tax expertise from them) where things frequently get quite confusing as to whether the person is an employee or self-employed. Most common head-butting occurs over "rental space" and "supplies" expenses that somehow/somewhere show up and then reduce net cash flow to the person.

With that in mind, and absent other facts, this scenario could well apply to that of the OP.

FE

[ddoshan]

It is my understanding that the IRS will not accept returns with form 4582, or whatever that number was, untill at a minimum mid February. Even then they do have a special process if the employer did not issue you your W-2. I think you're supposed to contact them, the IRS first. In this case the employer did, but the employee says it is wrong so that might confuse the whole issue as to what course the client should follow.

[taxea]

Maybe. All the IRS receives when you e-file a tax return with a substitute W-2 is a W-2 with the non-standard indicator. Same indicator you'd use if the W-2 was handwritten. They don't have anyway to differentiate a substitute from other non-standard W-2 (well, not until they match up forms later in the year.)

The IRS has Darling to match the forms and they are catching this type of thing much sooner than they used to. I would file the sub and I would bet that the IRS flags returns with sub forms so they can look at them. As I said before be sure you have the facts straight and can document the refusal by the employer before you even attempt to file the return.

The ELF booklet can tell you whether Elfing is allowed with this form.

[Kram BergGold]

A possiblity

Is it possible she has increased her withholdings by SS and Medicare taxes?

[manyhappyreturns]

Lots of good input here. Thanks. Form 4852 instructions helpful, too. I sent my client an email giving her the options available, and she hasn't called for an appt or emailed me back yet, so not sure what route she'll take. I told her I have no problem calling her employer to get a corrected W-2, but of course I'll need to meet with her first to get all the figures straight. The ball is now in her court.

[David1980]

The ELF booklet can tell you whether Elfing is allowed with this form.

Indeed, the process is explained in IRS Pub 1345. Create W-2, flag as non-standard... ERO needs to retain signed 4852. Only reason you'd be unable to e-file is if you didn't have the EIN. Yes, the IRS wants people to wait til mid Feb (or later) to use the form, but they don't have anyway to differentiate a 4852 vs. a non-standard W-2. If you go through an e-file compliance audit it can get you though.