What To Do When An Employer Goofs Up Your Tax Form

Although it’s tempting to duck and cover to protect yourself from the onslaught of tax forms filling up your mailbox these days, it’s a good idea to examine the numbers on your W2s and 1099s to ensure they’re accurate. If an employer or bank screws up and reports it gave you more money than it really did and you don’t notice, you’re on the hook for the extra taxes.

Blogger and CPA Amber tells us that if you spot a discrepancy with your own records and the tax information, you should notify the company immediately and ask for an amended form. The wrong number you received on your copy was also reported to the IRS.

It stands to reason, though, that if a company’s payroll department is sloppy enough to make such an error, it may not be quick to fix it. If you can’t get a response from the company, Amber recommends you take your complaint to the IRS:

I would call the IRS to explain at 1-800-829-1040 and have this info ready: name, address, SSN, and payment information and the name, address, and phone number of the payer. Remember that if someone tries to tell you to file for an extension to wait for this to get sorted out, it’s only an extension to FILE, not to PAY and if you don’t PAY on time, you get hit with interest and penalties. Worst case scenario is that you report the incorrect amount, pay the extra taxes, and when it all gets settled at a later date, you get refunded. And if that were to happen I think you can supposedly get interest/penalty money from the company that screwed it up the first place.

If you’ve ever been sent an incorrect W2 or 1099, what did you do?


Edit Your Comment

  1. sirwired says:

    Errr… this CPA needs to take another tax class or brush up on her internet skills. Calling the IRS is indeed the correct action, but you don’t EVER have to pay taxes you don’t owe due to a bad W-2 (which means you aren’t getting interest/penalties from your employer) After you call the IRS (after 2/15, the deadline for your employer), they’ll send you Form 4852, which you may use to file the correct numbers.

    This information was right off the IRS website, and obtained by Googling “incorrect w-2”.

  2. Jachim says:

    In a former life, I worked in the office doing accounting and day-to-day stuff. After a couple years, I moved out to the shop. That year, they gave EVERYONE an incorrect W2. They accrued our wages for the last days of the year and reported it as income. Of course, as employees are paid on a cash basis, this was incorrect.

    I caught the error on my W2 in about 20 seconds and asked what was going on. They explained the situation to me, and I explained to the two girls with accounting degrees that it doesn’t work that way.

    They had to recalculate and reprint W2s for about 50 employees.

    • Rachacha says:

      Something similar happened at a former employer. As I recall, the employer closed the books for the year, but the payroll provider included a couple extra weeks of pay from the next year. The employer caught it after they had distributed the W2s and by the end of the week they had reissued the W2s.

  3. RAEdwards says:

    I’m stuck on a related issue. My wife only gets about 8.25 an hour and works 32 hours a week. She’s been working since September. He employer only had down that she paid about 40.00 in federal taxes and nothing in state. I’m pretty sure this is wrong, but we don’t have all of her paystubs (i think). Is there a way to request what she reported to the IRS or are we just SOL?

  4. RogerX says:

    “And if that were to happen I think you can supposedly get interest/penalty money from the company that screwed it up the first place.”

    “I think you can supposedly?”

    That’s some pretty solid advice right there. I’d bank on it!

  5. incident man stole my avatar says:

    a buddy worked for a company that got his W-2 right but double reported his earnings to Social Security.. he’s tried to get SS to correct it but every year his statement is wrong… good for his retirement

    • MrEvil says:

      I believe the IRS is also the entity you would report to should there be a discrepancy in your Social Security wages. The IRS collects FICA and medicare from the self employed, and employers submit the withholding to the IRS. The Social Security Administration only handles the granting of benefits and their disbursement.

  6. larrymac thinks testing should have occurred says:

    I believe that Tax Cat is supposed to present any and all tax-related posts. I’m afraid I can’t believe anything mentioned here without his official imprimatur.

    • RogerX says:

      I had used Tax Cut since 1999, but noticed last year that the product is now called “H&R Block At Home (formerly Tax Cut).” This year’s copy doesn’t even include the Tax Cut name at all.

      Still a very solid, easy to use product.

  7. amuro98 says:

    I once quit a job after just 6 months. The company wanted its signing bonus back, despite the fact they had failed to actually put me on a project in the time I was there – which was why I was leaving.

    So they tried to pull the signing bonus out of my last paycheck, which caused it to go negative, and crashed the payroll system. So they gave me my last paycheck as normal, and tried to bill me for the signing bonus separately. I refused to pay it, saying they violated the employment contract first by failing to give me any work to do. That seemed to satisfy them for awhile. Even my old boss didn’t think I should have to repay the bonus, and was fighting HR about it.

    Skip forward to tax season the next year. I had just had paid my CPA for my filed returns, when the company mailed me an updated W2, showing a reduction in income due to the signing bonus. They also sent a sternly worded letter telling me to mail them a check for the amount of the signing bonus.

    This was 2 weeks before April 15. I called the CPA and asked if she could rerun my returns with the new W2, and she could – but it was also her policy to charge triple the normal fees since this was a rush job. I told her to bill my former employer directly, and to tell them to have her fees taken out of the signing bonus I owed.

    In the end, I still ended up repaying the signing bonus, of which the company then lost due to the tax bill my CPA submitted. I think the company actually got to keep $100 out of the original bonus, but then when you consider all the hours I spent on the phones with their HR and legal departments, they probably would have just been better off writing the $3000 as a loss and moving on with their life.

    A few years after that mess, the company closed up shop forever. Good riddance.

  8. Mary13134 says:

    Well as far as 1099’s go, I have a situation where a 1099 is reporting that I made more than I did. If fact about 2000.00 more than it was supposed to be. Knowing the idiot who claims this, I called the IRS. Since I will turn in about 29 1099’s the IRS says dont worry about it until they audit me…LOL Then it will be up to me to prove this incorrect. Fortunately I can do just that but what about the lazy person who doesn’t keep accurate records? Good luck is all I can say cause from past experience IRS doesnt admit when it makes a mistake…

    • BBBB says:

      “Well as far as 1099’s go, I have a situation where a 1099 is reporting that I made more than I did. If fact about 2000.00 more than it was supposed to be. Knowing the idiot who claims this, I called the IRS. Since I will turn in about 29 1099’s the IRS says dont worry about it until they audit me…LOL Then it will be up to me to prove this incorrect”

      I also had an incorrect 1099 once (much smaller amount or error). My father (an accountant) helped me with this. I put the amount form the 1099 on the IRS form and subtracted the error on “misc.” in the same section of the form. I then attached a note to explain the “misc.” entry. This method means that the return does not get kicked out for automatic auditing due to the 1099 not agreeing with the form. I never had to deal with them to fix the error (and the company never issued the correction).

  9. kimmie says:

    TiVo screwed up our W2s 3x last year. (Fixed it once then realized in the fix they messed up something else etc). I had to pay a CPA to fix it after the last time, and the company let folks expense the CPA fee, but only if they were still employed there (i.e. hadn’t left before the end of the year). It was seriously cheesy and annoying.

  10. ChuckECheese says:

    Last year Kelly Services sent me a W-2 claiming they paid me wages they hadn’t (I never worked for Kelly Services in 2009). And after waiting awhile past the 15 Feb deadline, I called the IRS and requested a 4852. They tried to take the information online, but the IRS rep couldn’t, because her computer didn’t allow her to input data for 2009 yet – the form still said 2008. This was some time in March.

    The next step, according to the IRS, was that Kelly had a period in which to correct or contest the report of discrepancy, and issue a corrected W-2. Kelly’s response was to mail another, identical W-2 with incorrect info. I called the IRS again explaining that I had not worked for the company at all in ’09 and had received no wages or any other money from them in ’09. IRS’s reply? “Oh well, it’s not that much money, and the taxes they claim they withheld covers your liability anyway.”

  11. junip says:

    I haven’t gotten my w-2 for 2010 from my last employer yet, but I’m pretty sure it’s going to be very wrong, so I was happy to see this post. How do I know it will be wrong? Well, when renewing my unemployment claim, the person I was talking to told me that my employer reported additional wages in the quarter after I said my employment with them ceased. A lot of wages. Enough to file a new claim. Since that wasn’t true, she had to fill out a bunch of extra stuff to say the employer’s records were invalid. Blah.

  12. kimmie says:

    I’d also like to point out that calling the IRS can yield a variety of replies. My employer misreported my ESPP income (employee stock purchase program) and when I called the IRS about it, one person said I could fix it over the phone. So I gathered the paperwork, and when I called back, the next person claimed I had to file a whole mess of paperwork and such, which turned into a nightmare and required a tax lawyer because the IRS then demanded $20k I did not have.

  13. Nighthawke says:

    One employer mangled my SS# on my W-2, which my tax preparer caught. I took it back to them and they tried to lay the blame on me for a poorly written out W-4 form. “Break it out” I told them, but the store manager who was an ass anyway tried to bull out of it. I shrugged and said, “Break it out, I’m not here to play who’s the biggest loser all around, All I want is a fair shake for everyone. We’re dealing with the Fed here and it’s important that accuracy is maintained.” The owner got the form out, and sure enough it was legible and easy understandable. They redid the form and everyone was happy in the end, save for the store manager. They canned me shortly afterward on some BS, but it didn’t matter for the franchise was bought up 6 mos later.

  14. joshua70448 says:

    My wife did a paid internship at an architectural firm a few years ago, and the next year they sent us a 1099 instead of a W-2, claiming that she was a contractor, even though she worked in their office all day every day using their equipment. This meant we would be on the hook for ALL of the FICA taxes. We filed a complaint with the IRS and they found in our favor. The company sent us a corrected W-2 form, along with a letter saying that they had paid the IRS both their share AND our share of the FICA taxes, and that they wanted us to pay them back for our share. I laughed at their foolishness and filed their letter away.

    (and this is partly why my wife is getting another bachelor’s degree in food science…architecture sucks…)

  15. majortom1981 says:

    Also make sure they didnt screw up your salary by too little either. I had this happen to me without knowing and had to pay about $1000 extra to the government.

  16. gman863 says:

    Many years ago sold major appliances. One of the major manufacturers had a sales promotion where I earned points (ok, “Push Money”) for selling their products, redeemable towards new appliances for my home.

    At the end of the contest, I was rewarded with a new ceramic top range and washing machine. I never received a 1099, so I did not list it as income on the following year’s tax return.

    Fast forward three years: I receive a letter from the IRS stating I owe back taxes from income paid by The Whirlpool Corporation.

    $389,000.00, give or take a few cents.

    After giving myself both CPR and a big glass of wine, I chilled out and thought it through. The following morning, I called the IRS auditor assigned to the case, explained what I had actually received (which likely had a wholesale/”employee purchase” value of under $600) and made her the following tounge-in-cheek offer:

    “Since it appeared Whirlpool’s accounting department shorted me by roughly $388,500.00, would it be possible for you to contact them on my behalf as an IRS agent? As soon as they correct their mistake by sending me the balance, I’ll gladly do my civic duty by immediately paying any taxes and penalties due and – if it doesn’t violate the law – I’ll even give you a finder’s fee for helping me recover money I had no idea I was owed.”

    The IRS agent was screaming with tears of laughter. Once she composed herself, she gave me the contact info. for the Whirlpool office and told me to ask them to correct it. If they refused or dragged their heels, she said to call her back the following week and she would demand they show proof I was paid this outrageous amount.

    It took one five-minute call to Whirlpool’s accounting department to fix things. Within two days I had a FedEx envelope with a “corrected” 1099 for $389; the following week I received a letter from the IRS stating the matter was closed and I owed the government nothing.

  17. waters511 says:

    I was just told by someone who is going through the same thing at this very moment is “The reporter forgot to mention you have to ask for Individual Accounts to reach the right place and they will not touch the problem until Feb 14. And of course, they were nearly as defensive about it as was the employer. Once upon a time it was “Government in action”. Today it’s “Goverment inaction”.

    Thought I’d share!