In filing taxes, you’re probably aware of the W2 and the 1099 forms. Apart from these two, there are other ways to file taxes without these two tax forms.
Generally, filing your federal income tax is classified depending on the type of employment you have. For common-law employees or those employed under traditional employer-employee relationships, they use Form W-2. Freelancers usually report their income using the appropriate Form 1099, whether it’s 1099-NEC or 1099-MISC for miscellaneous income.
However, there are unfortunate events where you misplace these important IRS tax forms, or if the employer was not able to furnish you with a copy of these documents. Whether it’s a missing form or an unissued one, there are still things you can do to comply with applicable tax law and pay taxes correctly.
How do you report income without a 1099?
Independent contractors are usually expected to use Form 1040, a Schedule C, or a Form 1099, depending on the nature of the income to be reported. For example, Schedule C indicates profit or loss from a business while 1099-NEC is issued by companies to their independent contractors for non-employee compensation.
However, some payments are small or are paid directly in cash in exchange for a service rendered. Some freelancers and self-employed professionals take small one-time projects, which are not covered by a 1099-NEC form. Although it might be overlooked by the Internal Revenue Service, this is still an income you should report—even if a 1099 form was not issued.
First, here are some common situations where a copy of 1099-NEC is not issued by an employer.
- The amount due is less than $600, according to IRS regulations.
- The company forgot to issue the form or missed the document
For freelancers, earning over $600 should entitle them to a Form 1099-NEC from the employer or client. If this is the case and yet you received no copy of the IRS tax form, you should request it from them.
From your end, the income you make as a freelancer or a self-employed professional should be reported through a Schedule C along with your business expenses and income since you’re considered a self-employed individual. If you also earn over $600 in a taxation year, you are also obliged by law to pay your self-employment tax.
Basically, reporting self-employment taxes even without a Form 1099 is mandatory. Freelancers and independent contractors need to keep track of their earnings, estimate the rest of their taxable income and taxes for the rest of the year, and file the correct income taxes. If you’re unsure how to proceed, enlist the help or get tax advice from a tax professional or an accountant.
How to File Your Taxes Without a W-2
As mentioned earlier, a Form W-2 is issued for regular employees. The Wage and Tax Statement contains relevant and confidential information about you and your employer’s tax status, the amount of income you received as a common-law employee,
According to the Internal Revenue Service, tax form W-2 is required for employers engaged in any trade or business that pays compensation or remuneration. This includes non-cash payments exceeding $600 for a taxation year paid in exchange for services rendered by an employee. It also includes withheld taxes for Social Security or Medicare taxes.
Using Form 4852, Substitute for W-2, Wage and Tax Statement
In filing a tax return without a W-2 form for any reason, the IRS offers an alternative through Form 4852. Also known as “Substitute for Form W-2, Wage and Tax Statement,” this alternative is accomplished by the taxpayer under two scenarios identified by the tax service:
- The employer, client, or payer fails to issue a Form W-2 or Form 1099-R
- The employer, client, or payer issues an incorrect Form W-2 or Form 1099-R
Usually, when the issued tax form is incorrect, a corrected version can first be requested from the employer or the payroll provider. The corrected forms are Form W-2C or another copy of Form 1099-R with a check on the box indicating that the second copy is a correction of an earlier one.
Aside from regular employee income, there are also other sources of income covered by Form 4852. The IRS Form 1099-R is also issued by financial institutions or other organizations that make designated distribution of $10 or more from the following:
- Retirement plans and profit-sharing programs
- Individual retirement arrangement (IRA) plans and dividend income from these plans
- Payments from a pension, annuity, insurance contracts, and survivor income benefit plans
- Life insurance contracts paying for permanent and total disability
- Charitable gift annuities and others
Additionally, in filing your Form 4852, you will need to request relevant information about withheld wages and taxes from your employer. Accomplishing the form also requires you to keep certain documents as a reference, such as the final pay stub for the tax year. You will also need to keep a copy of the accomplished form for your records. There are instances where the IRS asks taxpayers to verify that the employer, for example, has credited you properly for the Social Security Administration.
Is It Illegal to File Taxes Without a Form W-2?
By following the alternatives provided by the Internal Revenue Service, it is perfectly legal to file your taxes even without a copy of Form W-2. Particularly, if you file electronically, there shouldn’t be any problem filing taxes, provided you follow the steps outlined on the site.
For starters, take note of the following information needed to accurately file federal income taxes. Most of these pieces of tax information are those usually included in your W-2, such as:
- Social Security wages and tips, detailed separately
- Social Security Tax withheld
- State income tax withheld
- Medicare tax withheld
- Local income taxes withheld
- Medicare wages and tips, detailed separately
- Employer identification number (EIN)
- Address and name of the employer or payer
- Amount of withheld federal income tax
- Net earnings paid by the employer or client, including tips, allowances, and other compensation for the year
If it’s not available, you can file taxes without attaching a copy of Form W-2. However, the information listed above will need to be entered on the form. Additionally, it is important that your employer reported your W-2 form, even if you’re not given a copy, to the Social Security Administration before the tax deadline. The SSA should share it with the IRS, and will be used in verifying some of the information you put in your form. Discrepancies between your information and the one available with the SSA and the IRS could result in an audit from the revenue service.
Will the IRS Catch a Missing W-2?
As mentioned earlier in the article, filing a tax with a missing W-2 copy should pose no problem. Provided that you’ve filed Form 4852 and that the employer or the paying party has also made the necessary arrangements, such as settling accounts with the SSA.
If there’s no problem in terms of requirements and accuracy of the information, then expect no correspondence from the IRS. However, there are certain instances where the IRS captures the missing W-2, particularly if there’s an issue with the provided data. They usually send a letter informing you, the taxpayer, about the missing or inaccurate information. If it’s only a field or two, they can correct it after you submit the proper tax documents. However, gross inaccuracies could lead to the rejection of a form or worse, an invitation for an audit.