@ishan1105 wrote:
I meant tax again on the grossed up amount while filing taxes. The grossed up amount was added to my total wages in my W2 in box 1. I should be taxed on my gross income and not on grossed up amount for which company has already paid taxes.
I think you misunderstand. Business are not allowed to give tax-free relocation assistance. Anything they give you (or pay on your behalf) must be included in your W-2 taxable wages. If there was tax withheld, that will be included in the box 2 and box 17 federal and state withholding, and you get credit for it on your tax return (it adds to your refund or reduces what you owe).
For example, suppose the plan was to give you a $15,000 bonus. That's taxable income to you, so you would net about $10,000 after taxes. If they really want to give you $15,000 for you to put in your pocket, they have to "gross up" the amount to approximately $21,000 or so, depending on your state and how they estimate your income tax. The entire $21,000 is considered taxable income to you. It is subject to withholding income tax and social security and medicare tax. The entire amount is included with your regular wages on your W-2 and you get credit for the withholding shown on your W-2. It is not taxed twice. The withholding is an estimate but your taxes are only really calculated on your tax return.
