What if Form W-2 reports more than the fair value of a noncash bonus?

The taxpayer should not ignore the Form W-2, but the information return does not end the substantive tax analysis. The preparer should identify the compensation item, determine the correct inclusion amount under the applicable rules, seek correction when appropriate, and keep support for any valuation position.

On an exam question, the best answer usually separates reporting from law: a Form W-2 may report wages, but the taxable amount for noncash compensation depends on the property transferred, restrictions, fair market value, and timing rules.