Relocation Gross Up

[HeatKod]

Scenario: I received $25,000 for relocation + $15,000 gross up for a total of $40,000. The total is included in my W-2, Section 1. Of this total, the relocation company paid $15,000 to tax authorities. How do I avoid not getting taxed again? 

[VolvoGirl]

The 15,000 tax should be included in box 2 with the federal withholding (or plus box 17 for state).  You didn't pay the tax, it was withholding taken out.  So you have to claim the full 40,000 as income and get credit for the 15,000 tax withholding.  

[Critter-3]

Moving expenses are not deductible any longer  but the relocation company really gave you a good deal ... not only did you get money to move they spotted you more than enough to cover the taxes on the entire payout.  Be happy ... you got a great deal especially since part of  the $15K they sent for withholding you will probably be refunded to you.

[Opus 17]

Basically, you got a $40,000 bonus, it doesn’t matter what you spent it on under the new tax rules. There was withholding on the bonus as there would be on any wages or bonus.  Both the bonus and all the withholding should be included on your W-2.  You won’t get the Social Security and Medicare with holding back because no one ever does.  You will get credit for state and federal withholding when you prepare your tax return and if your overall withholding is more than your overall tax bill you will get a refund, just like in any other year.