What to Do With an Incorrect W-2

Learn Your Options if Your W-2 Is Wrong

Tax Return Form. Credit: Nadya Lukic / Getty Images

"Help! My W-2 is wrong! What should I do?"

Most tax professionals have encountered this question often enough. Here's what M. Sullivan in Texas told us about his problem and our response. 

"The wages my employer reported on the W-2 are not correct. My employer has filed bankruptcy and does not have an office staff to correct the W-2. He has reported less wages than what I think I made. I can prove this by getting copies of my checks from my bank. I have told him that he is wrong, and he told me to try filing with the W-2 he sent. If I file with his W-2, I get more of a refund because he shows me earning less. He says that the IRS cannot do anything because "the doors to the business are closed forever." He says that if the IRS comes back, it will come back to him and not me because he has filed bankruptcy. What would you do? If I file accepting his W-2, I get more of a refund, but if I file what I think is right, I get less. Can the IRS come back on me?"

Here are the facts: His employer issued him Form W-2 with the wrong numbers on it. Sometimes the amounts shown on Form W-2 are slightly different than amounts reported on the employee's final pay stub of the year because the W-2 might have adjustments in taxable income or tax-free benefits. But this doesn't sound like a normal accounting discrepancy. It sounds like the employer is trying to hide W-2 income from the Internal Revenue Service. That's not a good thing. In fact, the IRS would love to hear about it.

Contact the IRS If Your W-2 Is Wrong

I recommended that M. Sullivan contact the IRS and file a complaint. The IRS will investigate the matter directly with his employer. If you have a similar problem, you can call the IRS toll-free at 1-800-829-1040.

When Bankruptcy Is the Problem 

There may be another way to solve the problem, however. According to IRS spokesperson Jesse Weller, "When a former employer has gone bankrupt, it is sometimes possible for the employee to follow up directly with the bankruptcy court.

The bankruptcy trustee may be able to provide a corrected W-2 to the employee rather than the employee having to use a substitute W-2 (Form 4852). If that isn't possible, then [filing Form] 4852 is the best option."

So you could contact the bankruptcy court in your area if you find yourself in this situation.

Ask how you can contact the trustee who is overseeing your previous employer's bankruptcy case, then reach out to him and explain the situation.

Report an Incorrect W-2

If that doesn't work, follow the instructions on the IRS website for reporting an incorrect W-2. You can report what you think is the correct amount of wages and withholding using Form 4852, Substitute for Form W-2. You will have to reference your pay stubs if you use this form. The IRS might take longer to process your tax return because it must verify the amounts on Form 4852 and it may contact you with any questions.

Get Help 

This is an unusual tax situation, so you may want to find an accountant to help you if your W-2 is wrong. Look for an enrolled agent, a certified public accountant or a tax attorney because these are the only professionals who can talk to the IRS on your behalf without you being physically present.

Preparing an accurate tax return can be tough and the IRS is always willing to help you investigate matters like this that complicate the process even more. "I applaud the questioner for wanting to do the right thing and file an accurate return, even though it may not be to his or her benefit," said Jesse Weller.

The IRS does take notice of taxpayers doing the right thing, and IRS agents will often go out of their way to provide valuable help. But you'll need to help the IRS, too. Always keep copies of your pay stubs so you can quickly provide the IRS with any additional information if a discrepancy occurs.