It’s important to ensure that the information on your Form W-2 is correct. If it isn’t accurate, come tax time you could run into problems with the Internal Revenue Service. The federal withholding field in Box 2 of your W-2 tells the IRS how much federal income tax you paid for the year. The box may be empty for any of several reasons.
If you claimed exemption from withholding on line 7 of your Form W-4, you told your employer not to take any federal income tax out of your paycheck. Another possibility is that you didn’t earn enough wages for federal income tax to come out. It’s also possible that you claimed a lot of allowances on your W-4, which lowered your taxable wages and caused zero withholding. Lastly, someone in the payroll department may have committed a clerical error.
If Box 2 of your W-2 isn’t supposed to be empty, contact your payroll department to help you figure what went wrong. The department can efficiently pinpoint whether it or you caused the error.
If You Made the Error
If you erroneously claimed exempt or too many allowances on the W-4, you’ll likely owe the IRS when you file your tax return. Your employer withheld the tax according to your specifications, so it didn’t do anything wrong. Adjust your W-4 for the next year so the same problem doesn’t happen again. Go carefully through lines A through G of the Personal Allowances Worksheet so you claim the right number of allowances. Use the IRS withholding calculator to help you fill out the form so you pay the correct amount of tax. If you earned a small amount of wages that caused no withholding, then the right amount of tax was taken out.
If your employer made the error, it must give you a corrected W-2, or W-2c, promptly after discovering the issue. You use the W-2c to file, or amend, your tax return with the IRS. Your employer must also file the corrected W-2 with the Social Security Administration.
Whether you’re supposed to file a return depends on your income threshold, not on whether you owe taxes. Your income level is based on your filing status, age and type of income. You may use the IRS interactive tax assistant to help you figure whether you should file a return. If you intend to file a joint return with your spouse, both your incomes combined will be used to assess your income level. Even if you don’t have to file, the IRS recommends doing so in case you qualify for credits, such as earned income credit, health coverage tax credit, additional child tax credit, adoption credit, first-time home-buyer credit, the making work pay credit and the American opportunity credit.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.