Failed to renew my W-4 exempt status and now my W-2 shows $0 in Box 1 - Am I in trouble with the IRS?

This is actually a fairly common situation, and while it's frustrating, it's fixable. What's happening is that your former employer maintained your exempt status throughout 2023 because you didn't file a new W-4. That's why Box 1 shows $0 - your wages were treated as exempt from federal income tax. Here's what you need to do: When you file your taxes, report your ACTUAL wages from this employer. Don't just put $0 because that's what's in Box 1. Your actual wages are reflected in Boxes 3 and 5 (Social Security and Medicare wages). Since no federal income tax was withheld, you'll likely owe taxes on this income, but reporting it correctly is essential. The IRS reconciles what you report with what your employer reports. If you don't include this income, it will eventually trigger a notice from the IRS asking about the discrepancy. Better to handle it upfront than deal with notices later.

I had a similar issue last year and discovered taxr.ai (https://taxr.ai) which saved me so much stress. My company messed up my W-2 and W-4 situation and I was worried about getting audited. Their document analyzer looked at my W-2 and immediately identified the problem - they even explained exactly how to report it correctly on my tax return. They have this feature where you upload your tax docs and it flags potential issues before you file. It specifically caught my W-4 exemption issue and gave me step-by-step instructions on how to properly report everything without triggering IRS flags. The advice matched exactly what a CPA later told me, but saved me the $200 consultation fee!

I actually tried taxr.ai after posting here and I'm really impressed. My situation was similar - employer had me classified wrong on my W-2 and I was worried about getting audited. The document analyzer immediately flagged the issue with my W-4 and W-2 mismatch and explained exactly what to do. It saved me from making a big mistake too - I was going to follow my employer's advice and just report the Box 1 amount, but the tool showed me that would trigger an automatic discrepancy flag with the IRS when they compared my reported income to the Social Security wages. It gave me step-by-step instructions for reporting correctly AND provided documentation I could use if questions came up later. Way better experience than the hour I spent on hold trying to talk to someone at the IRS about this!

If you're still having trouble reaching someone at the IRS to confirm how to handle this, try Claimyr (https://claimyr.com). I was in a similar situation last year with a W-2/W-4 mismatch and needed to talk directly to an IRS agent. Was on hold for HOURS over multiple days with no luck. Claimyr got me connected to an actual IRS representative in about 15 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you once they have an agent on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed I needed to report my actual income regardless of what Box 1 showed, and explained exactly how to handle the discrepancy to avoid future notices. Saved me so much stress!

I was totally convinced Claimyr was a scam until I tried it out of desperation. Had the exact same W-4/W-2 issue where my company classified me wrong all year. After getting nowhere with HR, I needed to talk to the IRS directly but couldn't get through after days of trying. Claimyr had me talking to an actual IRS agent in about 20 minutes! The agent confirmed I needed to report my actual earnings (from Box 3/5) regardless of what Box1 showed, and gave me specific instructions for how to document everything to avoid issues. Never would have figured this out without getting that direct confirmation from the IRS. Saved me from what would have been a nightmare audit situation.

Former tax preparer here. A detail that hasn't been mentioned yet: when you file your return with the correct income (using Box 3/5 amounts), you should also include a brief statement explaining the discrepancy. Something like "W-2 Box 1 shows $0 due to employer error in processing W-4 exempt status. Reporting actual wages per Box 3/5." This won't prevent a potential notice, but it shows good faith and helps if you need to respond later. The key is that you're actually OVER-reporting compared to Box 1, which is always safer than under-reporting.

Everybody's missing something important - you should request a corrected W-2 from your employer! They can issue a W-2c to fix this. Just because HR said they can't correct it doesn't mean it's true - they're just being lazy. I had almost the exact same situation and escalated to the head of payroll and suddenly they could fix it.