Bankrupt Without W-2

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Today TaxMama hears from Andrew in TaxQuips forum, with this problem. “I worked for a company that went bankrupt; now I’m not getting a W-2. I didn’t keep my final pay stub. I have no way of knowing how much I made while working for the company. What now?”

Dear Andrew,

That’s a real bummer. Just curious, why did you not keep your final paystub?

It seems to me, even as a teenager, I had the good sense to hang on to things like that to make sure the company produced the correct information on that year-end W-2. (Of course, things were done manually then, so there was more room for error, back in the dark ages.)

First thing to do? Contact the Bankruptcy court and see if they have any information for you. When a company files bankruptcy, the court assigns a trustee. They may have records. If they do, that will save you time and money.

If they don’t, then, it’s going to cost you to reconstruct your income.

If you have any paperwork showing your hourly rate, that would be nice. Do you have any idea how many hours you worked each week? Sit down with a calendar and try to reconstruct your hours worked each week. If you had overtime, or were apt to have had overtime, put it down. Do your best. We know it probably won’t be accurate. But try.

Do you have a copy of your W-4, showing how many exemptions you claimed. If not, perhaps you can remember. Did you claim a lot so you wouldn’t have much withheld? Or did you claim just 1 for yourself?

Go to a good, local tax professional. Bring copies of your
bank statements showing your deposits. (You DID deposit the checks didn’t you? If you cashed them instead, it’s going to be really hard to prove your case!) Bring all the things you prepared.

S/he will help you recompute your payroll and create a substitute W-2 form for you – for IRS and State, using Form 4852 – http://www.irs.gov/pub/irs-pdf/f4852.pdf

And yes, you do need to report the income. If not, it will catch up with you later, with penalties and interest. After all, your income information was probably reported to your state each quarter, with your Social Security Number.

Keep an eye on this question – or today’s TaxQuip. Perhaps someone else has some better ideas.

And remember, you can find answers to all kinds of questions about business expenses and other tax issues, free. Where? Where else? At TaxMama.com.

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14 thoughts on “Bankrupt Without W-2

  1. TaxMama says:

    Dear Mike,

    Thanks for the suggestion.

    What’s wrong with that?

    1) You have to wait until 2011 to get the information for 2009. He’d be filing his tax return far past the extension deadline.

    2) The Social Security statement is base on W-2s that are filed.
    The company is not filing W-2s. If they were, we could get that information from IRS in late April, early May – without waiting for the following January or February for the statements.

    But, you are thinking. Good try!

    Hugs
    Eva

  2. Mike Hamilton says:

    Ever think about using your Social Security Statement? I seem to get one every year, and it lists my income history from the first year I worked up to the current one.

  3. David says:

    I’ve survived a number of audits in my lifetime, and I can tell you that the IRS typically looks at two things during an audit:

    1) 1099’s and W-2’s they have on-hand (their “proof”)
    2) the monies deposited into your checking accounts

    If the two are out-of-whack by some significant amount, and you don’t have sufficient deductions to explain the disparity, then you could be in trouble.

    (My last audit, they thought they had me on under-reporting $87k and wanted to know why I failed to pay $17k on taxes. I ended up not paying a penny, and probably could have turned the tables and gotten a refund. I’ve never had to pay them anything after any of my audits. Twice I got additional refunds.)

    In a case like this, I’d ballpark it and not worry further. The discrepancy is not likely to be sufficient in and of itself to trigger an audit. If the company’s trustee eventually does generate W-2s, you’ll get one, and at that time you can contact a tax pro and see if the difference warrants filing an amended return. Unless it’s an incredibly large percentage of your total income, it probably won’t.

    This is just what I’d do, based on my own personal experiences I’ve had with the IRS. I don’t get the impression that they’re out to punish every little issue anywhere they can, although it might seem that way from what the press reports.

    A bigger concern I’d have is that without final filings by the company, your unemployment, FICA, FUTA, and other benefits might not be accurately reported by this former employer.

  4. TaxMama says:

    Hi Andew,

    Now that you have the wages, look up above for the instructions on how to find the withholding. I gave you all the links.

    best

    Eva

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