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]

The company had vehicle in their name. Paid the insurance and everything associated to it (insurance, gas, repairs, etc)  We simply used the car when it was delivered to our house.

[Curbin200]

Why would this perk be added to my 2016 W2’s if it wasn’t mine at any point in the process or used for business

[Curbin200]

Also I never signed any loan or loan repayment documents. Wouldn’t I have to agree in written form to something like this? Even if I initially went along with it and accepted the pay as is with anticipation of getting the inflated salary in 2018 after his manufactured loan was paid off?

[Curbin200]

I understand that all the responses are not of legal advice nature and won’t act on them as if they were. I will seek an employment lawyer. Just getting opinions from educated people.

[TaxGuyBill]

That "perk" is taxable.  You were give a car to use for personal use.  The value of that is treated just like you were paid cash.  That means it NEEDS to be taxable to you.  If your employer does not do that, your employer would be committing tax fraud.

As I said before, that taxable amount SHOULD have been added to your 2016 W-2, which would make you pay much more taxes in 2016.

Your employer took a shortcut and added to 2017, rather than fixing 2016.

If your employer corrects the situation, yes, you will pay less tax for 2017, but that also means you will need to amend your 2016 tax return and pay those taxes.

Either way, the 'net result' is that you will probably owe a similar amount of tax.  If your employer corrects it and adds it to your 2016 W-2, you would also need to pay the IRS interest.  In other words, if you have your employer correct it, you could owe MORE money than if you leave it alone.

I would just leave it alone.

[Curbin200]

I will not. Thanks for the advice. But cooking the books and lying to employees is not ethical. I’ll ensure this won’t happen to someone else. Plus the effects are so much worse than you could ever imagine and I shouldn’t expect you to understand that on such a concentrated forum.

[Opus 17]

First.  Most fringe benefits are taxable, unless they fall into certain specific categories that have tax privileges like medical insurance premiums.

So personal use of a company vehicle is taxable income.  The fair market value should be added to your W-2.  (For example, if the lease payment on a similar vehicle is $400, then personal use of a work-owned vehicle would be worth $400 a month added to your W-2 taxable income.

It sounds like did not include the income on your W-2 and you did not pay tax on the value of car for 2016.  That means you paid much less tax than you should have last year, and he also paid less employment taxes (employer's share of medicare tax and social security tax.)

So for this year he gave you a raise and then took it back for the car he now says he "loaned" you.

There is no way to fix this yourself on your tax return.  You aren't repaying a prior  year overpayment of wages, for example.  There is no way to fix this problem yourself.  You may want to see  professional about your taxes this year.  You definitely should see an attorney because he is breaking several tax laws.

Now in the end, if he does undo this mess and issue a correct W-2 for your 2017 wages without the fake loan, he will also have to issue a corrected W-2 for 2016 that includes the value of the car as taxable income, so you will have to file an amended return and pay more tax for 2016.  It may be that the extra tax for 2017 is close enough to the tax you should have paid last year as makes no difference.  A good tax preparer could help you figure that out.  If it does equal out in the wash, then you might not want to mess with an attorney since, if everything was done correctly, you will owe less in 2017 but more in 2016.  If the raise for the "loan repayment" is equal to the value of the car that should have been in your income last year, then the tax bracket shift you see this year is exactly the same as the bracket shift you would see if you filed a corrected 2016 tax return.

And remember, while you owe more tax (or get a smaller refund) -- either this year or last year -- you got the benefit of driving a company owned vehicle which saved you on your own car payments, maintenance and insurance last year.

[macuser_22]

Perhaps neither you or the employer understood at the time that an employee cannot give an employee a tax free "gift", whether money or free personal use of a vehicle, or anything else, and now the employer is attempting to correct this in the cheapest way possible to avoid having to amend 2016 and pay back tax.  Anything that an employer gives to an employee is taxable with certain exceptions.  As others have said, the correct way is to issue a corrected 2016 W-2 and for you to amend 2016 and pay the additional tax on an amended return, but it would probably be a wash whether paid on a 2017 return or an amended 2016 return.

[Curbin200]

With having 4 dependents and deductions that didn’t apply due to max credits for my situation, it wouldn’t affect my 2016 refund amount. So I’m not worried about that being changed. I lost so much more than what meets the eye for his selfish payroll practices

[Curbin200]

Plus I never signed a loan agreement saying it was ok to have my pay raised only to deduct a manufactured loan and then be promised for 2018 to inherit the inflated salary only to be fired two weeks ago

[Carl]

That's why I'd quit the discussion in the forum, and seek legal counsel. Even if it turns out I have nothing on the legal front, I'd prefer to "know" that from a lawyer versed in this stuff, instead of from us "armchair lawyers" of which I am one, in this forum.

[macuser_22]

I agree with Carl.  This is more of a legal question than a tax question and only an attorney can offer legal advice, and then only after knowing all the details and seeing all of the documentation to understand just what took place and if it was legal or not.