Employers have a legal obligation to provide each employee with a Form W-2 that accurately reports their respective earnings for the tax year. Without it, preparing your tax return can be tough. However, the IRS has procedures in place for taxpayers who don’t receive a W-2 for various reasons, such as when the employer no longer exists.
Contact Your Boss
If you don’t receive a copy of your W-2 by Jan. 31, the IRS suggests that you first try to contact your employer or someone at your old job who may be able to put you in touch with the right person. Only after unsuccessful contact attempts should you call the IRS for help. An IRS representative will attempt to reach your former employer. However, you still need to file your tax return as accurately as possible without the W-2.
Using Form 4852
Form 4852 is used as a substitute for the W-2 that you’re unable to obtain and must be filed with your tax return. When preparing the form, you need to enter estimates of what your annual income was for the tax year, as well as the amount of federal and state income taxes withheld. The easiest way to accomplish this is by referencing the last pay stub you received before your employer went out of business. Your paystubs should report the cumulative amount of income earned, Social Security and Medicare tax paid, and all federal, state and local income tax withheld. If you’re unable to locate the most recent pay stub, you may be able to come up with a fairly accurate estimate using an earlier one – especially if your earnings were the same each pay period.
Form 4852 Explanations
The last two lines of Form 4852 require you to answer two questions. The first asks how you arrived at the income tax withholding figures reported. The second requests details on your efforts to contact your employer. For this second question, you can simply state that your former employer’s business was closed and that you’ve been unable to reach any of the owners. Keep in mind that the IRS must be aware of your missing W-2 before you file Form 4852 with your return.
Potential Tax Penalties
No one expects you to remember every single tax item that should’ve been reported on your W-2, but you do need to make a good faith effort to report figures that are as accurate as possible. To ensure that 4852 forms aren’t used by taxpayers to evade taxes, the IRS imposes an accuracy-related penalty that can increase the tax you owe by 20 percent, as well as some hefty civil penalties for filing a fraudulent or frivolous return due to unrealistic figures being reported on Form 4852.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.