My wife worked for an employer that went belly up - they used Paychex to pay her. No W2 - I contacted the IRS and found that the employer reported no income. How should I claim my estimate - will they take it as face value since there is no W2 - or will there be some record that they can look up from Paychex (this was for 2008 taxes).

Depends on the contract they had with the employer. In some cases, they are responsible for paying the taxes to the IRS. I would definitely contact them.

I suggest your wife contact Paychex directly and ask why she never received a W2 for 2008. It shouldn't matter that the employer went out of business. She should also verify her social security taxes were properly forwarded to the SS Administartion. Contact info here: Contact Information: Paychex Employee Services

However, if this turns out to be fruitless, I would advise that you report her income and her withholding to the best of your ability, perhaps based on the figures reported in her last pay stub of the year. Be prepared to justify whatever numbers you use.