Not Reporting W2 Wages?

It sounds like they are doing something illegal.

It's possible that they did not have any W2 income. Either they were self-employed and their income was reported on a different form (which still has to be reported on 1040), or they diverted their entire salary to 401(k), HSA, or other pre-tax contributions.

Someone FLAT OUT LIED. You just accused 'this individual' of tax fraud.

Note: Criminals commonly insist they are not doing anything illegal.

Judy: Try READING the question. Your answer is BS with regard to what is claimed.

If they made under the amount to owe tax, they'd get a full refund.  The IRS knows what they made.  If they got a refund they weren't entitled to by filing a false return, they'll be hearing from the IRS and be penalized for what they did, besides having to pay anything they owe.  Obviously they're wrong, they have to report it and it's illegal not to.  The IRS will explain that to them.

You can't report how much tax you paid on wages and not report the income from the wages. It's not POSSIBLE.  If you get a W2 form, the taxes and wages have already been reported to the IRS. You have to file if you overpaid taxes and want a refund. There is simply NO WAY not to report it if you file a tax return. 

I have no idea what they are talking about 'not reporting some types of employment'. It's not true, and it's not actually possible. You either report your W2 wages, all of them, no matter what you do for a living, or you don't--and you're guilty of tax evasion.

You don't simply LIST the taxes you paid. you have to fill out a complicated form that adjusts your wages against your deductions, even if that's only the standard deduction. Common sense should tell you this, if you've ever seen a tax form. 

This is simply not true and that person is not correct.

You've been given false information as a copy of all W2s you receive is always sent to the IRS. IRS computers are programmed to match any and all discrepancies and to correct the tax return, billing the taxpayer for the difference. This is perhaps one of their strongest enforcement tools. 

This is 100% illegal.

A few years ago, a tax protester in Michigan figured out that if he used a form to "correct" his W2 to zero and still report the withholding, he would get a full refund.

It wasn't legal but the IRS' computers were not programmed to look for this.

He wrote a book and told his story online.  Many people took his advice and filed the same way.

However......He ended up going to prison and paying back the taxes.  Many of his followers ended up in prison or, at least, had to pay back the taxes plus hundreds or thousands of dollars in penalties and interest.Years ago, this scheme ended up on the IRS' "Dirty Dozen" list of tax scams.  It has since fallen off as so few people still try and get away with it.

 The IRS will match up the W2 to their return and bill them for the taxes owed. You can't file a return with no income on it and show withholding.  Subtracting the standard deduction from zero income still leaves you with zero. It's impossible to e-file a return that way and if they filed on paper, they had to attach a copy of their W2.

Someone told you something that wasn't true.  Doing what you described isn't legal.  If someone did it anyway, they wouldn't get back a refund in the full amount of the taxes paid.

The IRS knows exactly how much this person was paid because the employer also sends their W-2 to the Social Security Administration which will be cross-checked with the IRS.

The IRS will correct the person's tax return and send them a bill for the tax they owe plus the penalties and interest.

"because they didn't list any of the w2 wages they in turn received a refund in the full amount of the taxes paid"   If there was no W-2 income, what taxes did they say they paid and how did they pay them?    Are you saying they made quarterly estimated tax payments on income they pretended they didn't have only to request refund of said estimated tax payments?    None of this makes any sense.   You must be misunderstanding or they are lying.