bounced payroll check included in W-2

[ljwalters]

Clients final payroll stub and w-2 match but the checked bounced. Co went out of business (bankrupted)

How do I deduct the amount from the W2 income without it being subject to the 2% hair cut.

Linda and buddy

[Terry D EA]

I think I would do a correct W-2 with an explanation of the changes. This not only affects the gross income but all of the withholdings as well.

[Maribeth]

I think I would do a correct W-2 with an explanation of the changes. This not only affects the gross income but all of the withholdings as well.

It is the employer's responsibility to pay in the payroll taxes. The employee will not have any withholding reduced or social security reduced because of the bounced check.

I would take the net amount of the check and show it as a reduction on line 21.

Maribeth

[kcjenkins]

Terry, it will not affect the withholding because the worker will get credit for the withholding whether the IRS ever collects from the employer or not.

Linda, enter the W2 as it is, then enter the net check as a negative on Line 21, with short explanation there. And make a copy of the bounced check to keep in your files, and tell the client to hang on to it for at least 5 years.

[ljwalters]

Thanks everyone for being so quick the client is in my office now. Line 21 is where I'l put it. I don't know why I didn't think of that solution. Maybe because my hayfever is so bad this morning I can hardly see the forms.

Thanks again Linda and buddy