My employer paid my moving expenses of $11,000 directly to third parties (mover and storage fees) they have now included them on my W2 box 12 code P. I did not incur these expenses and was not reimbursed for them. They do not seem to think this is an error and don't plan to correct this. How do I deal with this on my tax return.
You don't. Box 12 Code P represents the amount of money paid directly for "excludable" moving expenses. This means that the amount is not in Box 1 and Box 3 of your W-2. As it is not in your income, there is nothing for you to do relative to these amounts. The information in Box 12 is there to report the amount to the IRS and to let you know what a good company you work for.
As this was a work related move, you may have incurred other expenses that were not reimbursed by your employer that are tax deductible. E.g., the cost of transportation and lodging. See IRS Pub 521, Moving Expenses and IRS Form 3903 for more details.
I misread the OP. It said payment was made to a third party. Therefore, the amount should not have been reported with Code P in Box 12. All that being said, it shouldn't matter as the amount reported in Box 12 as having been paid to the employee is still excludable income and should not be reflected in the W-2 as wages paid.
Pay the tax on what is considered income to you.
Ask your employer to "gross up" what they paid for the move to make it tax/revenue neutral to you.
Can it also be used to get a larger Optional Sales Tax deduction out of the Schedule A Optional Sales Tax tables?
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