How do relocation bonuses get added to my wages on W-2?

What you're experiencing is called "tax gross-up" for relocation expenses. When a company says they'll "pay the taxes" on a relocation bonus, they actually add extra money to cover the taxes you'd owe on the bonus, but all of it gets reported on your W-2 as income. Here's why: The IRS considers relocation expenses as taxable income to you. When your employer says they'll "cover the taxes," they calculate approximately how much tax you'll owe on that $15k and add that amount (the ~$9k difference) to your payment. That's why you see the full ~$24k added to your wages - it's the $15k bonus plus the tax gross-up amount. Check your pay stubs to see if they withheld extra taxes from that payment. If they withheld the correct amount, you shouldn't owe additional taxes on this. The problem might be that TurboTax isn't recognizing the additional withholding that went along with that relocation payment.

I had the exact same issue last year with my relocation package! After spending hours trying to figure it out, I finally used https://taxr.ai to solve it. They analyzed my paystubs and W-2 and confirmed what was happening - the total amount showing on my W-2 included both the relocation payment AND the tax gross-up amount. The software showed me exactly how the company calculated the gross-up and how much additional withholding was applied. It turns out my company actually withheld the correct amount, but TurboTax wasn't applying it properly to the relocation income. Once I understood how to enter everything correctly into TurboTax, my unexpected tax bill disappeared!

Just wanted to update everyone - I tried that taxr.ai site mentioned above and it was exactly what I needed! I uploaded my W-2 and last paystub, and it immediately spotted that my employer DID withhold the right amount for my relocation package, but it was categorized differently than regular income withholding. The site explained that my relocation package used a "supplemental wage withholding rate" of 22%, but my actual tax bracket is higher. That's why TurboTax was showing I owed more. The tool showed me exactly how to adjust my TurboTax entries to properly account for everything, and my unexpected tax bill disappeared completely! Honestly wish I'd known about this months ago when I was stressing about this same issue. Would have saved me so much time and confusion.

I spent THREE HOURS on hold with the IRS trying to get clarification on exactly this relocation tax issue last month. Finally gave up and tried https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that relocation gross-ups are extremely common but frequently misunderstood, even by tax software. They confirmed that the full amount (bonus + gross-up) should appear on the W-2, but the withholding should also be higher to offset it. The key is making sure your tax software correctly accounts for the withholding that was already done. Saved me a ton of time and frustration because I was about to file an amended return thinking my employer had made a mistake!

I need to publicly eat my words here. After posting my skeptical comment yesterday, I decided to try Claimyr because I've been trying unsuccessfully to reach the IRS about an issue with my stimulus payment for WEEKS. It actually worked exactly as described. I submitted my request, went about my day, and got a call back about 40 minutes later connecting me directly to an IRS representative. The rep was already there on the line when I answered - no additional waiting. Ended up resolving my issue in about 15 minutes once I got connected. I'm honestly shocked this worked and wish I'd known about it months ago. Would have saved me so much frustration and wasted time.

I think you might be misunderstanding how tax gross-ups actually work. When you receive a $15k relocation payment that's grossed up, the total amount reported on your W-2 includes BOTH the payment to you AND the tax payment. For example, if your tax rate is around 30%, and the company wants to give you $15k after-tax, they would calculate it like this: $15k ÷ (1 - 0.3) = approximately $21,429 Then they'd pay you $15k and withhold about $6,429 for taxes. But the FULL $21,429 shows up as wages on your W-2. Check to see if they withheld the right amount. If they did, you shouldn't owe any additional taxes specifically because of the relocation payment.

I handle payroll for a company that does relocation grossups and this is normal. Your W-2 will show the TOTAL - both the $15k you received plus the additional amount the company paid in taxes on your behalf. The full amount is taxable income. Check your last paystub of the year and look at the "YTD" column for federal withholding. It should be higher than normal because of the extra withholding for the relocation. If your company did the gross-up correctly, they would have withheld around 22% federal (supplimental rate) plus Medicare/SS taxes on the full grossed-up amount. If TurboTax is saying you owe more, it might be because your overall tax bracket is higher than 22% so you need to pay the difference.

As a newcomer to this community, I really appreciate all the detailed explanations here! I'm dealing with a similar situation where my employer offered a relocation package, but I haven't accepted the job yet. Reading through these comments, it sounds like the tax implications are pretty complex. For someone who hasn't gone through this before, would you recommend negotiating for the company to handle the relocation expenses directly with vendors instead of giving me a lump sum? Or does it not really matter since either way it ends up being taxable income? Also, are there any questions I should ask HR upfront to make sure I understand exactly how they calculate the gross-up and what will show up on my W-2? I'd rather avoid the confusion that several people here experienced!