How to Spot a Fake W-2 Form & What to Do About It
August 01, 2023
Have you ever wondered, Can you fake a W-2? The answer is a resounding yes, and knowing how to spot a fake W-2 is essential for employers and employees to stay protected against scams.
Employers who are not careful enough to inform their HR personnel on how to distinguish W-2 phishing attempts will likely fall prey to these cybercrimes.
This article will show you how to identify a fake Form W-2. You will also learn the possible penalties and legal consequences of using false W-2 documents and the countermeasures you can take if you ever find yourself victimized by the said scam.
Let’s dive right in.
Key Takeaways
- W-2 forms are used to report an employee’s taxable income as well as their local, state, and federal tax withholdings in a given tax year.
- When it comes to determining how to spot a fake W-2, it is important to check whether the form has a consistent format and contains correct and complete information about the employee or taxpayer.
- In case you fall victim to any W-2 phishing scam, report the data loss immediately to the IRS, the Internet Crime Complaint Center, or your state tax agency.
- Fabricating W-2 forms and information can make you liable to penalties that range from $250,000 to $500,000 and imprisonment of up to five years.
How Does a W-2 Form Look?
The W-2 Form, also known as the “Wage and Tax Statement,” is used by employers to report all information about their employees’ salaries and wages. This IRS form is where employers detail the amount of federal, state, and local taxes withheld from employees’ earnings.
This information is needed by employees to file their tax returns.
To learn how to spot a fake W-2, you first need to know what a real Form W-2 looks like.
Let’s briefly discuss each section of the form:
Sections |
|
|---|---|
Box A | The Social Security Number of each employee is specified in this field. |
Box B | Employer Identification Number (EIN). |
Box C | Employer’s complete name, address, and ZIP code. |
Box D | Refers to the unique number assigned by a company’s payroll software to help distinguish the Form W-2 of each employee. |
Box E | Employee’s first name, initials, and last name. Don’t forget to add any suffixes, if applicable. |
Box F | Employee’s complete address and ZIP code. |
Numbered Boxes:
Box # |
|
|---|---|
Box 1 | Specifies each employee’s total taxable income, or gross earnings, including bonuses and tips. |
Box 2 | Indicates the total amount withheld from an employee’s taxable income to pay federal taxes. |
Boxes 3-6 | are reserved for information on the portion of employee income that goes to paying their FICA (Social Security and Medicare) taxes.
|
Box 7 | Box 7 is filled out if the employee earns tips as income. Employees who don’t receive pre-tax benefits should have the combined amounts in Box 7 and Box 3 of their W-2 form exactly the same as the amount in Box 1. Meanwhile, employees who receive pre-tax benefits should have the combined values in Boxes 7 and 3 similar to the values in Box 5. |
Box 8 | Reserved for tips designated to each employee by their employer. |
Box 9 | Leave this section blank. It used to be where the now-defunct Earned Income Credit is reported. |
Box 10 | Reports the amount reimbursed to cover employees’ dependent care benefits. |
Box 11 | Declares the deferred compensation or any amount of money received by an employee for work they have completed in the previous years. |
Box 12 | Specifies both deferred and other types of employee compensation. |
Box 12a | Uncollected Social Security taxes on tips. |
Box 12b | Uncollected Medicare taxes on tips. |
Box 12c | Taxable amount on group-term life insurance. |
Box 12d | Declares the amount deferred from employee income for their 401(k) or SIMPLE 401(k) retirement plan. |
Box 13 | For statutory employees, employees who contributed to their employer’s retirement plan or received third-party sick pay through their employer’s insurance policy. |
Box 14 | Union dues, health insurance premiums, withheld amounts for disability insurance taxes, and other tax details in an employee’s income that do not fall into any other boxes in their Form W-2. |
Box 15 | Employer’s state and their corresponding state income tax number. |
Box 16 | Indicates the total taxable wages earned by an employee in a given state. |
Box 17 | Declares the total amount withheld for state income taxes. |
Box 18 | Lists the total earnings or wages subject to city or local taxes. |
Box 19 | Reports the total amount withheld to pay for local or city taxes. |
Box 20 | Describes the type of local, city, or state tax paid for by employees and employers. |
How to Spot a Fake W-2 Form
Is it illegal to make a fake W-2 form? Definitely, and there are also specific legal implications in case you are caught knowingly distributing inauthentic W-2 forms.
If you want to know how to spot a fake W-2, you must pay close attention to the following details that distinguish a fake from a genuine Form W-2:
- Interchanging the letter ‘o’ with the number zero. This simple mistake is a common error in fabricated W-2 forms. Government-issued tax forms are meticulously prepared and surely distinguish between the number zero and the letter ‘o.’
- Inconsistent layout. An easy way to spot a fake W-2 is to check the layout. If there are crooked lines, varying typefaces, and font sizes, or blurred or unreadable areas anywhere in the form, then it is most likely counterfeit.
- Inconsistent information. All employee data on the Form W-2 must be consistent with all other information declared on their records in the company.
- Rounded values. A huge mistake made by scammers who create fake W-2 forms is that they round up the values in the tax withholdings, income, or wages. Perfectly rounded and even numbers are highly unlikely on government forms that report the total earnings and withholdings of an employee.
- Inauthentic Employee Identification Number (EIN). A fabricated W-2 is often not composed of nine numbers and does not use the XX-XXXXXXX format.
- Missing information. It is common for inauthentic W-2 forms to lack some information that a real Form W-2 has. Some information that fabricated W-2 forms often omit includes the employee's and employer’s name, address, zip code, and mailing address.
- Exceeded tax ceilings or percentages. If you calculate the taxable wages and find that the resulting amount exceeds the set ceilings and percentages for FICA, Medicare, and Social Security taxes, then you are probably looking at a false W-2 form.
- Incorrect or invalid Social Security Number (SSN). Fake W-2 forms often contain made-up identification numbers like EIN and SSN.
- Declared debts. While Form W-2 contains withholdings, insurance premiums, and union dues deducted from an employee’s salary, it does not disclose their loans or debts.
- Copy C is missing. Copy C of W-2 forms is meant to be the employee’s copy of the said form. Fabricated W-2 forms lack the said copy.
What To Do if You Receive a Fake W-2 Form
You might have come across a fake W-2 form in the past. If you need to create a real one to replace it, you can use a W-2 form generator. Besides that, here are helpful steps and proactive countermeasures you can take in case you receive a fake W-2 form:
Report Data Loss
Report the data loss by emailing the IRS at dataloss@irs.gov. In your email, include complete details of how and when you encountered the fake W-2 form. Write W-2 Data Loss in your email’s subject line.
Then, specify your business name, EIN, contact name, and other information. You must also provide a detailed account of how your business suffered data loss through a fake W-2 form. Lastly, include the exact number of employees who were affected by the data loss.
Advise Your Employees
Your employees deserve to know if their confidential information, such as their taxable income and withholdings, has been disclosed or altered by unauthorized individuals. The IRS also offers guidelines such as the Taxpayer Guide to Identity Theft and Publication 5027, Identity Theft Information for Taxpayers.
File a Complaint
You can also file a complaint or report the fake W-2 form to your state tax agency. Send an inquiry to StateAlert@taxadmin.org to gain information on who is best to contact on this matter.
Alternatively, you can file a complaint with the Internet Crime Complaint Center. It would also be best to keep the fabricated W-2 form to show as evidence to the local authorities.
How to Verify W-2 Forms
Aside from knowing how to spot a fake W-2, you must also train your payroll and accounting officers on how to verify W-2 forms.
Here’s how:
Step #1. Verify the Business Name
Authentic W-2 forms bear a legitimate business name on the field labeled Box C. Verifying the business name is a great starting point for attesting to the validity of W-2 forms because it lets you determine whether the business still operates or is still operating legitimately.
To verify the business name, check business listings and directories. You can also head to your local business bureau and ask for assistance in conducting a quick background check on the business declared in the W-2 form.
Step #2. Contact the Employer
Here’s a more straightforward strategy involving how to spot a fake W-2: Reach out to the employer using the contact information provided. The chances are fake Form W-2 contains a made-up and unreachable phone number.
However, if you are able to communicate with the employer indicated in the form, ask them if they can conduct a phone verification of the employee’s information declared in the W-2.
Some companies will gladly oblige to fulfill the necessary steps in verifying their employee’s W-2 form information, while other, larger companies will require you to secure an Authorization to Release Information form.
Step #3. Check the Format
Here’s another effective method for identifying a fake W-2: Keep a close eye on the format of the W-2 form. Crooked lines, inconsistent font sizes, rounded values, and blurred text are telltale signs of a fabricated W-2 form.
Check that the form is complete with all the necessary information and fields, and that it also has the Employee’s Copy attached to it.
Step #4. Confirm the Employee’s Employment History
The employee’s employment history should tie together correctly with the amount of taxable income, total federal, state, and local withholdings, and insurance premiums indicated in their Form W-2.
While the company or its Human Resources department may not disclose the exact salary earned by the employee, they can help affirm whether the employee is still employed by the company or not.
Step #5. Secure an Authorization to Release Information Form
At times, the process of spotting a fake W-2 also entails securing additional forms, such as the Authorization to Release Information form. It is used to authorize the release of an individual’s confidential information or records. Often, these records are related to their health insurance, taxable income, and tax withholdings.
A proper authorization form should either be written on plain paper and must be signed by the employee or individual whose records you wish to disclose.
Furthermore, the form must contain a notarization from the notary public and a statement from the individual whose records are being investigated that declares all information provided in their records is true and correct.
W-2 Form Scams
Also called W-2 phishing scams, W-2 form scams have become rampant over the past few years.
In fact, scammers use different methods to execute them:
- Email scams. The scammer impersonates an executive or agency to try to request information from an employee’s W-2. Email scams often target the company’s Human Resources staff, particularly those in junior positions or those who have little knowledge of how to spot a fake W-2.
- Phone scams. The fraudster may even try to reach unsuspecting victims via phone call. The scammer pretends to be working for a bank or a government agency in an attempt to convince the business to disclose employee information.
- Social media messages. Some scammers also use social media platforms such as Facebook and Instagram to find their targets. Others go as far as to replicate or create fake pages for government agencies, companies, and banks.
What Can Happen if You Use a Fake W-2 Form?
Can you be penalized and subject to criminal charges for falsifying a Form W-2? If you are caught using or distributing fake W-2 forms, then you will likely face penalties and fines, depending on the severity of your violation.
The penalty is based on the period between the original due date for filing taxes and the correct filing.
For example, an employer may have falsified information on W-2 forms due to disorganized recordkeeping. Yet they managed to file a form with the corrected information within 30 days after the tax filing due date.
They may reduce their penalty to $60. Otherwise, the employer may have to pay up to $500,000 per year (if not qualified as a small business).
Fraudulent filing is subject to a minimum penalty of $250 per form. Employees whose information and tax returns were affected by the falsified W-2 forms may file a civil lawsuit against their employer.
Consequently, taxpayers or employees who consent and willfully sign their W-2 forms despite knowing that the information declared in the document is not 100% correct could face up to three years in prison.
On top of that, violators may even pay fines amounting to $500,000. Taxpayers who use falsified W-2 forms for tax evasion purposes may be subject to paying fines worth $250,000 and/or face a five-year prison sentence.
Final Thoughts
It is crucial to train and educate your human resources and payroll manager on how to spot a fake W-2. If you’re not careful, you might end up compromising the privacy and safety of your employees and your business.
When in doubt, you can always use this article as your guide or maximize the use of a online W-2 generator to avoid resorting to fabricated tax forms.
Better yet, head to the IRS website to ensure you are well protected from W-2 scams and other forms of cybercrime.
How to Spot a Fake W-2 Form FAQ
#1. How do I know if my W-2 form is real?
Do you want to know how to spot a fake W-2? An easy and proven way to distinguish real from fake W-2 forms is to check the format. Authentic W-2 forms have consistent and neat formatting, while forged ones have broken or crooked lines, interchanged zeros and letters “O,” and inconsistent font sizes.
#2. Is it illegal to make a fake W-2 form?
Yes. You may be subject to penalties such as paying fines up to $500,000 or even facing three to five years in prison.
#3. Can the IRS detect a fake W-2 form?
The IRS is fully aware of scams involving the creation, distribution, and use of fake W-2 forms. As such, the IRS has partnered with the Security Summit to actively monitor scammers and strengthen their methods and training on how to spot a fake W-2.
#4. Is it illegal to submit a fake W-2 form to an employer?
Yes. Submitting a fake W-2 form to an employer means that you are providing them with false and inaccurate information about your previous employment and withholding information. It is important to declare 100% correct information in your tax forms to ensure that the details reflected in your tax returns are up-to-date.
