IRS Clarifies Taxability of 2017 Moving Expenses
IRS Clarifies Taxability of 2017 Moving Expenses

Editor’s Note: A version of this article previously appeared on CapinCrouse’s website. It has been reprinted here with permission.

As the national nonprofit accounting and consulting firm CapinCrouse has previously 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; and
  • 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).

CapinCrouse is available for additional guidance and questions.

Ted Batson is an attorney and CPA with CapinCrouse.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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