The United States Internal Revenue Service, typically referred to as the IRS, is an agency of the U.S. federal government that collects federal taxes and enforces the Internal Revenue Code. The Internal Revenue Code is the main source of laws that govern federal taxes in the United States.
For example, if an individual is a salaried employee, they may notice that each time they receive a paycheck, there is a certain percentage of funds that are missing from each paycheck. The portion of funds that are missing typically indicates the percentage of federal taxes that are being taken out of each of the individual’s paychecks in order to reduce the amount they owe to the government when it comes time to file their federal income tax return.
The percentage of funds that are withheld from an individual’s paycheck can be adjusted by modifying the documents they received as part of their new hire package. Specifically, an individual’s W-4 and I-9 tax forms can be adjusted to either reduce or increase the amount of taxes they have taken out from each of their paychecks.
It is important for an individual to be aware that, if they do not permit their employer to withhold a large enough percentage of federal taxes from their paychecks, they may end up owing the IRS money when they file their federal tax return.
Other factors that may affect how much money is deducted from an individual’s paycheck may include:
- The number of dependents they can claim, if any;
- Their annual earned income or salary; and
- Their tax filing status, for example, single, head of household.
Why Does the IRS Give Refunds?
Generally, employers are required to provide certain tax forms to each employee they hire and who continues to work for them. Employees will be required to complete these forms and provide them to their employer so the employer will know what percentage to withhold from each of their paychecks.
The majority of salaried employees will receive a W-2 form. Employers are required to return these forms to employees by a certain date before it is time to file taxes.
This is because, when an employee goes to file their federal income taxes for what they earned in the prior calendar year, the amount they owe in federal taxes will be based on the information that they provide in their W-2 form.
What Is a W-2 Form?
A W-2 form is provided to employees from their employers. It provides the IRS with information to calculate how much the taxpayer may owe in taxes for the year.
The exact amount of taxes that an individual will owe to the federal government depends on several factors that are unique to each individual taxpayer. This amount may change based upon certain conditions, including if an individual:
- Received a raise;
- Owed back taxes; or
- Were terminated from their job.
For example, if an individual had a large percentage of taxes being taken out of each paycheck and they are terminated in the middle of the year, the IRS will most likely owe them a refund on their taxes when they file their federal income tax return. This is because an individual may have had too much withheld from their paycheck at the beginning of the year when they had a job but they now no longer have that salary.
It is important to note that the tax laws and related tax forms may vary slightly for individuals who are independent contractors and individuals who are self-employed. The type of tax forms that an individual will be required to file will be determined by their specific job and income.
Similar to taxes that are calculated based upon the information that is supplied by an individual on their W-2 form, the IRS may also use other tax forms, such as 1099 forms, to calculate an individual’s taxes. In some cases, an individual may have to pay quarterly taxes if they are an independent contractor and their employer does not withhold taxes from their paychecks.
In any of the scenarios discussed above, if the amount that is taken out of an individual’s paycheck or is paid towards their quarterly taxes exceeds the amount that the individual owes in taxes, the IRS will issue the individual a tax refund.
What If a W-2 Is Missing or Incorrect?
An employer is obligated to send its employees correct W-2s that summarize the wages they earned for the year. That employee is required to file their tax return by the due date, however, even if they do not receive a W-2.
Taxes must typically be filed by April 15, unless an extension is filed.
What If I Have Not Received My W-2?
If an individual does not receive a W-2, they should contact their employer immediately and require that they send out a new W-2. In general, an employer is required to provide the W-2 before January 31 or 30 days after the employee leaves their employment.
If an individual receives an incorrect W-2, they should also contact their employer immediately.
What Happens If an Employer Refuses to Correct or Mail You a New W-2?
If an individual contacts their employer and they have an employer who refuses to send the W-2, the employee should file a complaint with the IRS. There are additional forms that would be sent, which must be completed in order to provide proper W-2 information.
The best way for an employee to substantiate wage and tax withholding information is to retain records of their wages.
What Are the Penalties for Incorrect W-2?
The penalties for an incorrect W-2 are $100 per incorrect form. The Social Security Administration (SSA) returns forms with name or number mismatch issues to an employer in order to obtain a corrected W-2 form.
It is important to note that there may be new W-2 tax information that employers should be aware of.
What is the Penalty for Not Filing W-2?
The penalties for not filing a W-2 when an individual files their taxes includes:
- $50 per form if it is 30 days late or less;
- $110 per form if it is between 30 days late and before August 1; and
- $270 per form if filed after August 1.
What Happens If a New W-2 Arrives after a Return Is Filed?
If an individual receives a new W-2 and the amounts on that document do not match the information in their filed tax return, the individual will need to file an amended tax return. The IRS can correct clerical mathematical errors on a tax return without amending the return.
However, an individual should file an amended return if there is a change in their:
- Filing status;
- Credits; or
- Tax liability.
Do I Need an Attorney?
Tax laws are extremely complex and are constantly changing. Improperly filing taxes or not filing the correct amount may have serious consequences and cause you to be forced to pay additional monies.
Because of this, it is essential to ensure that your tax return is correctly filed. There are various types of tax preparation services on the market.
However, these services cannot provide the same level of service as an experienced tax attorney. If you are unsure how to obtain your W-2, are having trouble obtaining a correct W-2, or need representation before the IRS, your tax lawyer can help.