| I took a job in a new state and the new employer paid my relocation expenses.
Unfortunately, the company put the total amount (about 5K) as "tips" in Box 12a of the W2.
As a result, I now owe over 2K in taxes!
Is there anything (legal) I can do to minimize this tax?=====>UNLESS it is reported on your W2 box 1 as taxable wage/salary, you can not deduct it on your return. However it is not reported as your taxable income reported on W2. Since the moving expenses were reimbursed by your company, the relocation expenses would not be deductible. Box 12 Code P represents the amount of money paid
directly for "excludable" moving expenses. This means that the
amount is not in Box 1 and Box 3 of your W-2. As it is not in
your income, there is nothing for you to do relative to these
amounts. The information in Box 12 is there to report the amount
to the IRS and to let you know what a good company you work for.
Both qualified and non-qualified moving expenses have to be reported on Form W-2. Non-qualified moving expenses are subject to withholding at the time the reimbursements are made. Qualified moving expenses should be reported on the Form W-2 in Box 12 with Code P. Non-qualified reimbursements must be included in the employee’s wages in Boxes 1, 3 and 5, so, Deductible moving expense reimbursement paid directly to you will be reported in Box 12 of your W-2 and will be preceded by the code letter P. Under no circumstances should they be included in Wages that are shown in Box 1 of your W-2. Your employer must withhold federal income tax, social security tax, Medicare Tax and state tax from the reimbursement. Most employers increase your reimbursement to make up for the deductions for taxes – called Gross-Up.so, All that being said, it shouldn't matter as the
amount reported in Box 12 as having been paid to you is
still excludable income and should not be reflected in the W-2 as
wages paid.
(Why would the employer do that? It's technically not income.)====>> It simply shows what the employer paid to prevent you from claiming the expenses again as said above.it is up to each employer. For example, under nonaccountable plan, Your employer will add the amount of any reimbursement paid to you to your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2, and then you can dedcut it only when you itemize deductions on Sch A of 1040.
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