Boss gave 2016 “Perks” (leased car etc) but in 2017 wanted them repaid in manufactured loan and deducted off my paycheck. Where do I report this on my taxes?

[Curbin200]

He purposely raised my income to accomplish the loan repayments to equal out 

[Carl]

Did you pay taxes on those perks received in 2016? If you did not, then you have nothing to deduct or claim.

[Curbin200]

But he raised my income by $22,600 only to have me pay $22,600 in loans off my paycheck

[Carl]

You have nothing to deduct here. Borrowed money is not your money. It never was, is not now, and never will be. Therefore you never paid taxes on that "borrowed money", so you can't deduct it when you pay it back. If you are being charged interest you can't deduct that either, because you can only deduct interest on a secured loan (such as a home mortgage) or qualified Student Loan Interest.
While what your boss is doing is legal, it's unethical. But there's nothing you can do about it other than find another job and quit. Of course, that could result in your employer taking legal action against you. Doing so would cost them money, and if there is not any type of formal loan or payback agreement, a good lawyer representing you could easily "turn the tables" on what I see as an unethical employer.
But I digress. I am not a lawyer, or even a "tax expert" by any stretch of the imagination. It's also outside the bounds of this user to user support forum to give legal advice. All I can do is tell you that tax wise, based on the information provided as best as I can interpret it, you have nothing to claim or deduct here. So for you, seeking legal advice in your local jurisdiction from a licensed lawyer may be in your best interest.

[Curbin200]

Ok thank you. It put us in a different tax bracket when he raised pay for only the purpose of straightening his books out. It has affected us in benefits, and now taxes with 4 dependents. Do you think I have any kind of case? I paid off the whole thing according to paychecks and the employer “let me go” a few weeks ago. Our normal refund is not in order according to this “manufactured” loan to help my employer

[Curbin200]

He raised the Gross Pay for the same amount of the manufactured loan. It’s more income that takes away from the refund our credit usually adds to

[SweetieJean]

We cannot give legal advice. See a licensed attorney in your state.

[Carl]

Again, I'm not a lawyer by any stretch of the imagination. But in my state of FL what your boss did is without a doubt in my non-legal mind, a blatant violation of state labor laws. Were it me, I'd get a lawyer and do everything possible to sue him into a tax bracket well below the poverty line.

[Curbin200]

I will call an employment attorney tomorrow. Thank you for everyone’s help. Please feel free to add more clarity to my situation. We were let go at the holidays with nothing and the one thing we look forward to every year is our tax refund and now it’s $7000 less than it was any other year I was at the same income.  Also my paycheck lists the “loan” repayment as after tax deductions. Is there a place in turbo tax that I would report this amount? Keep in mind I never received any money from this manufactured loan he is having me repay. It was my impression that the car, etc was a perk given as a performance thank you. Not something I’d ever have to pay back.

[TaxGuyBill]

As I pointed out below, that "perk" is not just a "thank you".  It is a TAXABLE benefit, and you MUST pay taxes on it.

[Opus 17]

You may have a labor law case with your state board of labor but not a tax issue.

The value of a company car that you get to take home and use for personal use must be included in your income. It sounds like this happened in 2016.

Then, if your employer reduced your pay in 2017 (for whatever reason), then you simply have less income to report in 2017. (Assuming that your W-2 reflects the income you actually received and not your gross salary.)

One year you paid more tax on more income, the next year you pay less tax on less income.  That's all there is to it.

Separately you might have a labor law case against him.  It may have been illegal for him to recharacterize the use of the car as a loan.  It depends on your mutual understanding of your employment conditions. (You had an employment contract, if not written down then you still had a verbal contract.)  He probably had the right to take away the car for 2017, unless it was a benefit in a written contract, but he probably could not legally make you pay back for using the car in 2016.  But you have to pursue this with a labor attorney in your state. 

(And of course, if you do recover back wages, they will be taxable.)

If your employer issues a W-2 that is for your gross salary and takes the "repayments" as an after-tax deduction from your pay instead of a before-tax salary reduction, there is a procedure to deduct the payments from your taxable income.  But you won't know if you need to use that until you see your W-2.

[TaxGuyBill]

In my opinion, it sounds like it SHOULD have been taxable wages for 2016.  So the "proper" course would have been to amend the 2016 W-2, which would make you need to amend your 2016 tax return (and owe taxes on that).

The employer just took a shortcut.  While technically wrong, it avoids everybody from having to amend, and the 'net' result would likely be pretty much the same.

In other words, if you were to 'fight it', the employer may need to amend your 2016 W-2.  That would mean you would need to go amend 2016 and owe just as much money, if not more (because of the interest owed to the IRS) than just leaving it as it is now.

[Carl]

TGBill, I'm looking at the reasons they got the raise to begin with. It basically doubled the taxable income and may have even put them in another tax bracket for 2017. Having to "pay back" the perks would only be a reportable event if they were taxed on such perks to begin with. But for the employer to provide what I interpret as "free untaxed perks" in the form of a car, and then later give me a raise (thus increasing the business expenses) and then using that raise to pay back the perks is just ethically wrong. If they have to be paid back, they were never perks to begin with and a misrepresentation to the employee was done here. That's just wrong. Were it me, at a minimum I would have no problem spending a few hundred bucks for a legal consultation with a lawyer on this, to help me determine if it was worth pursuing further on the legal front.

[TaxGuyBill]

Unless the car was used ONLY for business, the car is NOT a completely tax free benefit.  Assuming that is the case, that value SHOULD have been added to their 2016 W-2.  In other words, 2016 SHOULD have been in the higher tax bracket.

It seems it was not added to the 2016 W-2, so the employer took a shortcut and put it on the 2017 W-2 instead.

If that is the case, I would not argue it at all.  If the OP's income is similar in 2016 and 2017, arguing to correct things will result in extra work (amending 2016), similar amount of tax, PLUS interest owed on the 2016 tax.

[Curbin200]

The car was given as a perk to only use personally for my wife and I assumed no financial responsibility for the vehicle. The whole purpose of the raise was to appease the Perks that were given in 2016. I recieved no monetary benefit from it. It’s just now I realize how bad of a position it really put us in. (Taxes, benefits, Etc). I don’t know why I didn’t speak up. I think it’s because he verbally told me that when it was completed on Dec 31st, 2017 that I would stay at the inflated salary. Ironically I was “let go” in late Dec, a few weeks ago.