"my employer says there's nothing he can do on his side".
He's wrong. A corrected W-2 is the ONLY way to handle it properly. He also needs to refund you the FICA tax withheld on the imputed income. It's a hassle for him to get that back from the Social Security Administration.
That said, there is a work around in TurboTax, to eliminate the income tax. But there is no way to get FICA back, other than a corrected W-2. Your employer has to do that for you.
1. Enter a line 21 deduction, for the same amount. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Enter the number with a minus sign (-) in front. Briefly explain at description.
