Nonprofit Resources

IRS Clarifies Taxability of 2017 Moving Expenses

As we’ve reported, the Tax Cuts and Jobs Act (TCJA) suspended the ability for employers to pay for or reimburse employee moving expenses on a tax-free basis and for employees to deduct unreimbursed expenses. 

However, the effective date in the TCJA did not indicate whether the suspension of the tax-free reimbursement applies to expenses incurred for a move prior to 2018 but paid for or reimbursed in 2018. For example, would this apply to a January 15, 2018 reimbursement for a payment the employee made to a moving company for a December 15, 2017 move?

The IRS has now clarified that it does not. Under IRS Notice 2018-75, employee reimbursements or payments an employer makes in 2018 for qualified moving expenses incurred in a prior year are not subject to federal income or employment taxes.

Note that:

• Payments or reimbursements must be for work-related moving expenses that would have been deductible to the employee if the employee had paid them before January 1, 2018 
• The employee must not have deducted the expenses in 2017
• If your organization has already treated employee reimbursements or payments as taxable, you can follow the normal tax adjustment and refund process (see Publication 15, section 13 or Form 941-X and its instructions)

Please contact us with any questions. 

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