REIMBURSEMENTS STAFF BOOKKEEPING DUE TO DUE FROM CODE
If your company decides to continue helping new employees pay for their moving expenses, its total cost could rise (due to the FICA tax), but reimbursements will not be limited by the Code § 217 deduction. Withholding is at the same rate as for the employee’s other wages, unless the employer elects to treat the moving expense as supplemental wages.
Moving expense reimbursements paid under a nonaccountable plan must be reported as wages and are subject to FICA and FUTA taxes. In essence, employer-paid moving expense reimbursements will be treated as reimbursements made under a nonaccountable plan, e.g., a plan that gives employees an allowance for expenses, but does not require that employees account for their actual expenses or return any excess allowance. (Under those rules, an expense reimbursement is nontaxable if the expense has a business connection, the employee adequately accounts for the expense within a reasonable time, and any excess reimbursement is timely returned.) Tax-free moving expense reimbursements were not subject to the employer or employee portion of FICA tax.ĭuring the suspension period, however, both the employer and employee portions of the FICA tax apply to moving expense reimbursements. Here’s why.īefore the Act, qualified moving expenses paid by an employer were not subject to income or employment taxes if paid under the accountable plan rules. Loss of the exclusion might, however, make employer-provided moving expense benefits more expensive for your company. In most cases, those expenses should continue to be fully deductible by employers. Loss of those tax advantages affects the tax consequences for employees, but it does not prohibit employers from continuing to pay for employees’ moving expenses.
During that suspension period, only members of the Armed Forces on active duty who move pursuant to military orders and incident to a permanent change of station can still use the deduction and exclusion. Now that there is no deduction for moving expenses, can we still reimburse moving expenses?ĪNSWER: The Tax Cuts and Jobs Act suspended the moving expense deduction for individuals and the exclusion for amounts employers pay for deductible moving expenses (“qualified moving expense reimbursements”) for taxable years beginning after 2017 and before 2026. QUESTION: Our company sometimes reimburses new employees for their moving expenses when they relocate to join the company.
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