The Tax Attic with Jerry Coon — January 7, 2009

Jerry Coon, Enrolled Agent

Jerry Coon, Enrolled Agent

New tax season presents common situations

It’s finally the beginning of the tax season. I say “finally” because those of us in the tax business have been building toward this date since September. That’s when we started going to seminars and learning how all of the new laws would interact with the tax returns we will be preparing in the next few months. That’s also when we started ordering the supplies and the various software packages that we use to prepare not only the many types of tax returns we file but also the various business reports we file such as W-2s and 1099s.

A tax preparation firm like Action Tax Service uses technology to the fullest extent possible in an attempt to ensure that clients get the absolute best product that we can give them. However, all of the technology in the world won’t help us prepare a return if we don’t have the needed information at our fingertips.

For the most part, employed taxpayers can’t file a tax return until a W-2 is received. Most retired taxpayers can’t file a tax return until a 1099-R or a Social Security SSA-GOV is received. We can use a last check stub to create an estimated tax return, but we are not able to finalize and actually file a return without those official documents.

Let’s look at three common but troublesome situations.

First, the majority of all W-2s and 1099s will be received by January 31, but what happens if a taxpayer does not receive that statement by January 31 or February 10 or even February 28?

Second, what happens if the statement received is wrong?

Third, and even worse, what can be done if the wrong type of statement, such as a 1099, is received instead of a W-2?

What’s a taxpayer to do in these situations?

Let’s discuss the first situation in which the W-2 or 1099 is not received. The reporting procedures for W-2s are different than those that regulate the reporting of 1099s. It is important to remember that even though employees are required to have their W-2s available by January 31, the employer is not required to submit these documents to the Social Security Administration (SSA) until February 28. Note that I said “Social Security Administration” and not the Internal Revenue Service. In our system of reporting, the SSA gets the original set of W-2s. The IRS doesn’t get a full copy directly from employers. Ultimately, the IRS matches up the information from tax returns and other employment-related forms filed by the employer with the information that was submitted to the SSA, but that whole matching process can take up to two years to take place. My point is this: Calling the IRS to report an employer before February 28 is most likely a wasted telephone call. It might make the taxpayer feel better, but the employer doesn’t have to send anything to the government before that date and, even then, the reporting is made to the SSA and not the IRS.

Forms 1099, on the other hand, are sent directly to the IRS, and the SSA doesn’t get a copy of those 1099s.

It goes without saying that our tax system is convoluted and this is just one more example. Why don’t we don’t have one large clearing house where all of these forms are sent? Perhaps it is time for a private company to take over the processing of those forms. With our federal government about to take over health care, maybe they should give up the processing of W2s and 1099s as a trade-off. If private industry couldn’t process those returns more efficiently, more accurately and cheaper, I would offer to eat one of my fishing hats or maybe one of my golf gloves or perhaps one of my Knoxville Nationals t-shirts. I could probably offer to eat my whole boat and it wouldn’t matter because it’s never going to happen. Our federal government is in the acquisition mode, not the privatizing mode.

Employers are required to make W-2s available to all employees by January 31. Making these statements “available” is determined by company policy. Some employers include the W-2 in the employee’s last paycheck of January. More employers every year are taking advantage of technology and e-mailing the W-2 to their employees. Some employers mail the W-2s to the current mailing address on file. There are usually no problems with current employees. The problems arise with ex-employees. They don’t get a paycheck in January and an employer, in this situation, is not apt to e-mail a W-2 either. These W-2s will most likely be mailed to the last known address on file and if it comes back as undeliverable, the company has fulfilled its responsibility to that employee. It’s up to the employee to contact the company and make arrangements to get the W-2.

This is Jerry Coon signing off. Next week, I will discuss the other two situations where the statement received is either incorrect or the wrong statement is received.

Jerry Coon is an Enrolled Agent. He owns Action
Tax Service on Northland Drive in Rockford.
Contact him at

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