The wages reported on my w-2 are wrong, should I file using it anyway?

[jennipher_b-hotm]

I did not receive any "wages" from my LTD insurance company in 2021 because they are withholding payment to repay an overpayment in previous years. The max they pay me in taxable wages every year is $2880 but my W-2 says $4750.

[Hal_Al]

Q. The wages reported on my w-2 are wrong, should I file using it anyway?

A. Yes, in your case.

For tax purposes, you did receive $4750.  You just used some of it to pay off a debt.

If you paid tax on that income (that you are now repaying), in previous years, there is a provision for claiming a deduction, or credit,  on your current year tax return.  Unfortunately, that provision only applies to repayments of $3000, or more , per year.  Furthermore, you are not allowed to amend the previous year returns. 

[jennipher_b-hotm]

I did not owe and would not have received $4750 in taxable income. They withheld $240/mo ($2880) in taxable 2021 income to repay non-taxable income received in prior years. It’s going to take MANY arduous hours on the phone getting the W2 fixed but I need to file my taxes asap. Is it better to file knowing the W2 is wrong and then fix it later or wait until the W2 gets corrected (an unknown amount of time since the company is worse than most government agencies about fixing their mistakes).

[Hal_Al · Accepted solution]

It is  better to file, knowing the W2 is wrong,  and then file an amended return (fix it) later, when the corrected W-2 is received.  That way you only have the company to deal with.  If you file the W-2 wrong, you'll be hearing from the IRS.  

That said, the IRS has instructions on what to do if you receive an incorrect W-2 and the employer is uncooperative: https://www.irs.gov/faqs/irs-procedures/w-2-additional-incorrect-lost-non-receipt-omitted/w-2-additi...

Form 4852 is available in TurboTax.