IRS Clarifies Taxability of 2017 Moving 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.
- 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)
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