2019 payment added to 2023 wages by former employer

[megane]

Is this allowed? My husband's employer paid us 3K in advance for a move in 2019 and I guess, forgot to add it to that W2 so they decided to throw it on 2023's w2 so they could reconcile their books. Is this legal? Shouldn't they have corrected the W2 for 2019 instead of adding it to this year, when it was not received and no taxes were taken out for it? We already asked them to correct the W2 but they have refused. I have been on the phone with the IRS for most of the day today and no one can seem to answer the question. 

[Mike9241]

need a little more information. you say it was an advance. what were the terms of the advance and when did you move. THIS MIGHT CHANGEE MY ANSWER.  However, as of now, I'm of the opinion that it's taxable in 2019.  Moving expenses have not been deductible since 1/1/2018. if you were to get a corrected W-2 for 2019, you would need to file an amended return. If you owe additional taxes, you will also owe penalties and interest from 4/15/2020.

I'm really surprised that the IRS won't help. What did they tell you? 

your option is to use form 4852 (substitute W-2) to report correct amounts but the IRS wants you to first contact them so they can contact your employer to send you a corrected w-2. To be consistent you would have to amend 2019. This can no longer be done using Turbotax. 

[megane]

It was a relocation advance paid in 07/2019 for 12 months on the contract (from 06/2019-06/2020). We stayed for 24 months at that location and then worked at another location with the same company until 09/2023. 

So far the people I talked to at the IRS could not find a specific rule stating whether the company's action was allowable and how far back W2s could be corrected. In general, they agreed with our position that the company should not have thrown on a wage in 2023 that was paid in 2019.

I was trying to get something in writing that we could go back to the company with, to ensure a corrected W2 since they refused to correct it. However, the IRS agent we spoke to yesterday helped us to file a W2 complaint and if the company does not supply the corrected information, we will file an amended return for 2023 with our payroll proof.

[Opus 17]

The relocation pay was required to be reported on his W-2 in 2019, and was subject to income tax and social security and medicare withholding.  You are correct that it should have been reported in 2019, but you are not really out anything if you pay the tax on the bonus in 2023 instead of 2019.

What you are really looking for is a way to get the bonus tax-free because of the employer's mistake -- you don't want to pay this year, and you also want to argue that it is too late for the employer to amend a 2019 W-2.

For 2023, you would have to use a substitute W-2 form 4852.  Enter the data that you believe is correct.  In other words, substract $3000 from box 1, box 3, box 5 and box 16.  Don't change the withholding in box 2, 4, 6 or 17, because that's what was really withheld.  You may be asked to provide an explanation.  (If you already filed your 2023 return using the original W-2, you would have to do an amended return.)  Save copies of letters and other documents proving the situation in case of audit.

Note that Turbotax will warn you that you had too much social security and medicare tax withheld.  There is nothing you can do about that in turbotax.  to get a refund of those taxes (about $230) you would have to file form 843 by mail.  This form is not part of your tax return and is not supported by Turbotax. 

https://www.irs.gov/forms-pubs/about-form-843

Then, you have to hope the IRS does not try to collect on the wages from 2019, or if they do, you will have to cite the 3 year statute of limitation.   The IRS can only assess tax (in most cases) for 3 years after you filed.  So as long as you filed your 2019 return on time, the statute of limitations ran out in May 2023.

https://www.irs.gov/filing/statutes-of-limitations-for-assessing-collecting-and-refunding-tax

[megane]

Because we were overseas and qualified for the foreign-earned income exemption, it was just social security and Medicare. Wouldn't the employer be responsible for their portion of the payroll tax as well? I have a feeling that this happened to a few other employees who were in the same situation as us. I guess in the end, it doesn't really matter what they do, it was just frustrating how they handled this. Thank you for including the info on the statute of limitations. I appreciate it.  

[Opus 17]

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@megane wrote:

Because we were overseas and qualified for the foreign-earned income exemption, it was just social security and Medicare. Wouldn't the employer be responsible for their portion of the payroll tax as well? I have a feeling that this happened to a few other employees who were in the same situation as us. I guess in the end, it doesn't really matter what they do, it was just frustrating how they handled this. Thank you for including the info on the statute of limitations. I appreciate it.  

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Yes if the employer correctly reported it in 2019 they would have paid their share of employment tax, but they did that anyway when they added it to your 2023 return.    (Or did they add it to box 1 but not box 3 and box 5?  That would be another mistake on their part.)