No W2 - No Chance of Obtaining

[Zee]

I have a client that worked as a waitress in a restaurant owned by her mother's boyfriend. The mother & boyfriend left (ahead of the creditors). She has no idea where they are, or how to find them. She was paid in cash and showed me a memo-type (combined timesheet & paystub) she was provided each payday. She only has a couple of the stubs they indicated Federal WH and social security was withheld. This is an EIC-type client.

Given the facts, I suggested we attempt to reconstruct her wages and prepare a subsitute W2 form Form 4852. My guess is the withholding taxes weren't deposited. The question is how will the IRS handle this return and the refund? Will it be adjusted? Delayed? I assume it can't be e-filed.

Or, if anyone has a better suggestion?

I hope this post doesn't get lost again (or duplicated). For some reason, it didn't transmit on my first reply.

Thanks to everyone in advance for their help.

[jainen]

not responsible

Your client was not responsible for depositing the payroll taxes. (That is true, right? She wasn't, like, a bookkeeper who could be hit with the 100% penalty.)

At this point you have no reason to think the business won't come through with the required paperwork. You haven't had a chance to try to obtain the W-2 because it isn't even due yet. The instructions for Form 4852 say you have to wait until mid-February before contacting the IRS for a copy of the W-2, and you shouldn't file the form in a return until April 15th.

Form 4852 was not eligible for e-file last year. I haven't seen this year's Pub 1345-A yet.

[Brad Imsdahl]

Interestingly, the IRS is required to give the taxpayer credit for withheld taxes, even if the employer did not deposit the taxes. As to how IRS will handle this, they probably won’t do anything, other than file notices with the old address of the employer for unpaid payroll taxes, if that is the case.

For your client, you need proof the taxpayer was paid, and proof the taxpayer had withheld taxes. If your client was paid in cash, I could see IRS saying the pay stubs are bogus and no EIC or refund allowed. You might have an uphill battle on this one. You might also want to be very careful to document everything and fill out the EIC questions carefully, as IRS could come back after you if this is EIC fraud.

Don't fall over backwards trying to help this client. I would bet she is a liar when she says she doesn't know where Mom is.

[ecb34691]

IRS accepts subsitiute w-2's after 2/15. I've always have tried to figure out how IRS is going to have any w-2 info available after 2/15 because of the process flow of w-2's - Employer not required to mail to SSA until 2/28 or electronicly by 3/31; the SSA process of converting paper w-2's and updating their systems, etc. At the IRS forums in the summer IRS & SSA admit they don't complete the w-2 process until about Oct.

Just make a good estimate that the taxpayer is confortable with and go on. Remember the t/p has to also sign the sub w-2 form AND the tax return.

[Snaggletooth]

Benefit of Doubt

Zee, I don't think it correct to proceed as if there will never be a W-2, until the deadline for issuing W-2s has passed. Even though I agree that given the circumstances, there is a 99% chance she will never get one. I believe this situation should wait until after January 31, then if no W-2 comes, proceed with the substitute.

Like the departed mother/boyfriend, chances are very good that the daughter may be less than honest as well. You don't have to automatically assume this, but I would allow for the proper amount of caution. If she is showing up at your office already, chances are she wants a quick refund and believes you can e-file her without a W-2.

My guess is that if you tell her you want to allow until Jan 31 for a W-2 to come, she will take her story somewhere else and try to get them to e-file.

[Zee]

As usual, thank's very much to everyone for the thoughtful answers. I called the client and explained the timing. She also told me she has talked to her mother, but her previous employer/boyfriend will not issue a W2, he's running from the IRS and creditors.
I have no idea how many checkstubs (memos) she has. I only saw two. She said she "tossed" the others. I'd agree this client probably isn't worth the effort, although I'd like to help her if she's legit....she does have three dids. Incidently, she's a waitress. JH did her taxes last year, but I haven't seen the return. I wonder how much tips she reported? This could be real can of worms with no reward.