What Happens If I Only File One W-2?

The Form W-2, Wage and Tax Statement, is a crucial document that employers issue to report an employee’s annual wages and the amount of taxes withheld from their paychecks. Each W-2 form accounts for income earned from a specific employer during a tax year. Accurately reporting all income sources, including all W-2s, is fundamental to fulfilling tax obligations and ensuring the correct calculation of tax liability.

IRS Income Reporting and Matching

The Internal Revenue Service (IRS) maintains a sophisticated system for tracking income, operating independently of an individual’s tax filing. Employers must furnish a Form W-2 to each employee by January 31st, detailing gross wages and withheld federal, state, and local taxes. A copy of this W-2 is submitted to the Social Security Administration (SSA), which shares the data with the IRS.

This establishes a comprehensive record of an individual’s reported income from employment sources, known as third-party reporting. The IRS receives similar information from other payers, such as banks (Form 1099-INT) or businesses (Form 1099-NEC). Before filing, the IRS has access to significant income data, allowing it to cross-reference third-party information with declared income and identify discrepancies.

Identifying Filing Discrepancies

The IRS employs an automated matching program to compare the income reported on a taxpayer’s return with information provided by employers and other third parties. When a discrepancy arises, such as income from a W-2 not included on the filed tax return, the IRS flags the account. This mismatch often triggers a CP2000 notice, known as an Underreporter Inquiry.

A CP2000 notice is not an audit but a proposed adjustment to the taxpayer’s return based on the identified income discrepancy. The notice outlines the underreported income, proposed tax liability increase, and any applicable interest and penalties.

Penalties may include an accuracy-related penalty (20% of the underpayment) and a failure-to-pay penalty (0.5% of unpaid taxes per month, up to 25%). Interest also accrues on the underpayment from the original due date until payment. The CP2000 notice specifies a 30-day timeframe for the taxpayer to respond.

Resolving Underreported Income

If a taxpayer discovers they have underreported income by not including all W-2s, or if they receive an IRS notice like a CP2000, prompt action is necessary. The primary method for correcting a previously filed tax return is by submitting Form 1040-X, Amended U.S. Individual Income Tax Return. This form allows taxpayers to adjust income, deductions, credits, and tax liability from the original return. When completing Form 1040-X, taxpayers must clearly state the changes being made and provide a brief explanation for the amendment.

In situations where a W-2 form is missing, the taxpayer should first contact their employer to request a duplicate. If the employer cannot provide it, or has gone out of business, the taxpayer can obtain a Wage and Income Transcript directly from the IRS. This transcript contains federal tax information reported by employers to the Social Security Administration, including W-2 data. A Wage and Income Transcript can be requested online, by phone, or by mailing Form 4506-T, Request for Transcript of Tax Return, to the IRS.

If an IRS notice, such as a CP2000, has been received, the taxpayer should carefully review it and respond by the specified deadline. The response form included with the notice allows the taxpayer to agree with the proposed changes, pay any additional tax, interest, and penalties, or disagree and provide supporting documentation to explain their position. Agreeing and paying the proposed amount promptly can prevent further accumulation of interest and potential additional penalties. It is important to address these notices promptly to avoid further complications and potential legal issues with the IRS, ensuring compliance with tax laws.