If you work more than one job or switch employers during the year, you'll end up with multiple W-2 forms. The Internal Revenue Service computers match returns with W-2s on file, so it's important to include information from all your forms. If you simply forgot to mail a copy of the W-2 with your return but accounted for the income, you don't need to file an amendment, and you won't face any penalty. If you forgot to include the income, you can remedy the situation with an amended return, though you may owe a small penalty or interest.
Most W-2s are electronically filed with the Internal Revenue Service now, so they know if you fail to report the income on your return. If the IRS owes you money on your original return two things may happen: you will get the refund you calculated, or you will receive a letter stating that your refund is being held until you file an amended return to report the missing W-2. You won't face any penalty if you don't owe the IRS money, but you have three years from the due date of the return to file an amendment; otherwise, you forfeit your refund.
Balance Due to IRS
If the missing W-2 means you owe the IRS more money than calculated on the original return, you may face penalties and interest on the amount of tax underpaid when you filed. You have three years from the due date of the original return to file an amendment, but the IRS may hold up a future refund if they determine you filed an incomplete tax return for a prior year, so it's important to keep up to date and pay any additional taxes owed in a timely manner. If you file early and then file your amended return before April 15 -- or the original due date -- you won't be subject to any late penalties.
Penalties are calculated as a percentage of tax owed. If you are due a refund, you won't face a penalty, but if you owe the IRS money, the IRS will assess a "failure to pay" penalty on the amount still owed, back to the date the original return was due. The penalty is 0.5 percent per month of the balance due, with a maximum penalty of 25 percent. If the IRS determines your oversight was due to fraud or negligence, you may face an additional 20 percent penalty on the unpaid amounts.
Filing an Amended Return
If your original return was Form 1040, 1040A, 1040EZ or 1040NR, file Form 1040X to amend your return. You will need to recalculate your total income, deductions and tax liability and report any differences from the original form, including an explanation for all changes. Resubmit corrected versions of any additional forms that are affected by your new adjusted gross income levels and attach a copy of the missing W-2. Calculate the net difference in tax liability and pay any remaining balance due the IRS. Amended returns cannot be electronically filed.
Naomi Smith has been writing full-time since 2009, following a career in finance. Her fiction has been published by Loose Id and Dreamspinner Press, among others. She holds a Master of Science in financial economics from the London School of Economics and a Bachelor of Arts in political economy from the University of California, Berkeley.