Employer Federal Tax Violation?

An employer in Northbrook, Illinois told the federal government they paid me X amount via my W2. There remained a credit of Y amount on my final paycheck. Though I have met all requirements to receive the final credit of Y amount, the employer will not release. The employer claims the amount was "pre-paid commission" to be reimbursed with future "earned commission". There were no commissions earned. With no commissions being earned, the amount Y shown as a credit on my last pay statement won't be paid. Okay, I can live with this. But, isn't the employer in violation of a federal statute for claiming to have paid me X, and reporting X on my W2, when the employer actually paid me less than X?

What is my recourse?

Is there a meaningful suit that can be filed against employer?

Should I simply deduct the unpaid credit of Y from my earned income for tax filing purposes?

It sounds like your employer handled this correctly. The employer is supposed to report any advance commissions as current income and you are supposed to pay tax on it.

If you repay unearned commissions in the same year you receive them, reduce the amount to include in your income by the repayment. If you repay the amounts in a later year, you may deduct the repayment in the later year or take a credit in the later year.