Pension & Benefits News IRS announces that employer payments in 2018 for employees’ pre-2018 moving expenses are excluded from employees’ income or employment taxes
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Friday, September 28, 2018

IRS announces that employer payments in 2018 for employees’ pre-2018 moving expenses are excluded from employees’ income or employment taxes

By Pension and Benefits Editorial Staff

The IRS has announced that employer payments or reimbursements in 2018 for employees’ moving expenses incurred prior to 2018 are excluded from the employees’ wages for income and employment tax purposes.

The Tax Cuts and Jobs Act of 2017 (TCJA, P.L. 115-97) added Code Sec. 132(g)(2), which suspended the exclusion from income for moving expenses reimbursed or paid by an employer for most employees for taxable years beginning after December 31, 2017 and ending before January 1, 2026, made these amounts taxable, except for amounts for active-duty members of the U.S. Armed Forces whose moves relate to a military-ordered permanent change of station.

The IRS has received questions concerning the application of Code Sec. 132(a)(6), which excludes qualified moving expense reimbursements from gross income, to payments or reimbursements received after December 31, 2017 for expenses resulting from moves that occurred before January 1, 2018. The IRS notes that the TCJA does not specify whether the suspension applies to all payments or reimbursements received after December 31, 2017 regardless of when the move occurred, or to only to payments or reimbursements for expenses incurred for moves that occurred after December 31, 2017.

The IRS provides that the suspension of the exclusion in Code Sec. 132(a)(6) applies only to payments or reimbursements for expenses incurred in connection with moves that occurred after December 31, 2017. So, if an individual moved in 2017 and the expenses for the move would have been deductible by the individual under Code Sec. 217 as in effect prior to the amendments made by the Act if they had been paid directly by the individual in 2017, and the individual did not deduct the moving expenses, then the amount received (directly or indirectly) in 2018 by the individual from an employer as payment for or reimbursement of the expenses will be a qualified moving expense reimbursement under Code Sec. 132(g)(1). The payment or reimbursement of the expenses is excludable from income as a qualified moving expense reimbursement under Code Sec. 132(a)(6), and the amount is both excludable from wages under Code Secs. 3121(a)(20), 3306(b)(16), and 3401(a)(19) and excludable from compensation under Code Sec. 3231(e)(5). The same is true if the employer pays a moving company in 2018 for qualified moving services provided to an employee prior to 2018.

The IRS says that employers that have already treated reimbursements or payments as taxable can follow the normal employment tax adjustment and refund procedures. The IRS advises reviewing Publication 15, section 13, or Form 941-X and its instructions for details.

Source: IRS News Release 2018-190.

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