Won an incentive trip in 2013, left employer in 2014, received an earning statement with no cash but a huge tangible bonus listed

Question

This is a crazy one but I hope someone can help point me in the right direction.

• I won a trip in 2013 and went on the trip in 2013, the company did NOT list the trip as a bonus in the tax year of 2013
• I continued to work for the company for part of 2014 but was off their payroll midyear
• The last payroll of 2014 I received an earnings statement that showed earnings that are offset by Social Security Tax, Medicare Tax and a line item under "other" that lists Tangible Bonus. The net effect is that the cash value of the check is zero but my tax liability took a huge bump.
• I also found out from people that also went on the trip and still work for the company that no one else was charged with this tax liability.

It is pretty frustrating to suddenly have this tax liability dropped on me. I agree that there should be a tax liability for the trip. I am trying to figure out what game my former employer is playing but I think that they have been classifying the trip as a "business trip" so that winners of the incentive are not taxed. Now suddenly I don't work there and they decided to reclassify only me as having won an incentive trip and therefore hit me with all the taxes.

Is it okay for them to treat me differently than the others for tax purposes? Can they do this a year after the trip was won and redeemed? Would the IRS want to know about this fuzzy business trip practice? How would I report it? Besides now understanding the new level of slime from my former employer is there anything else I should be worried about? Could they do something like this every year just to be annoying?

I really appreciate any thoughts that you have. I live in Illinois.

Answer 1

I had experience working for a company that manufactures stuff and giving products to the employees. The condition was to stay employed for a year after the gift for the company to cover its cost (I think they imputed the tax), otherwise they'd add the cost to the last paycheck (which they did when I left). But they were straight-forward about it and I signed a paper acknowledging it.

However, in your case you didn't get a product (that you could return when leaving if you didn't want to pay), but rather a service. The "winning" trip was definitely supposed to be reported as income to you last year.

Is it okay for them to treat me differently than the others for tax purposes?

Of course not. But it may be that some strings were attached to the winning of the incentive trip (for example, you're required to stay employed for X time for the company to cover the expense). See my example above. Maybe it was buried somewhere in small letters.

Can they do this a year after the trip was won and redeemed?

As I said - in this case this sounds shady. Since it is a service which you cannot return - you should have been taxed on it when receiving it.

Would the IRS want to know about this fuzzy business trip practice? How would I report it?

Here's how you can let them know.

Besides now understanding the new level of slime from my former employer is there anything else I should be worried about? Could they do something like this every year just to be annoying?

No, once they issued the last paycheck - you're done with them. They cannot issue you more paychecks after you're no longer an employee. In most US States, you are supposed to receive the last paycheck on your last day of work, or in very close proximity (matter of weeks at most).