This chapter discusses the employee moving expense reimbursement. Advantages and disadvantages of this recruiting tool are covered first. The tax implications section focuses on Internal Revenue Service tests for deductibility. ERISA (Employee Retirement Income Security Act) does not come into play with moving expense reimbursement. | What is it? Companies reimburse employees’ moving expenses for job-related relocation. Reimbursements are taxable income to employee Employee can deduct moving expenses from gross income Copyright 2009, The National Underwriter Company When is it indicated? Consider when consistent with recruitment and staffing needs since moving expense reimbursement provides substantial benefits to employees Copyright 2009, The National Underwriter Company Advantages Can induce prospective employee to change jobs Larger companies can encourage employee mobility Is a tax-free form of employee compensation Employers have complete flexibility in plan design Copyright 2009, The National Underwriter Company Disadvantages Distance test requires new job to be at least 50 miles from employee’s former home to obtain deduction Expenses for house hunting or selling, buying, or leasing a residence are not deductible Copyright 2009, The National Underwriter Company Tax Implications Employer tax treatment Moving expense reimbursement to employees or third parties on behalf of employees is tax deductible IF meet reasonable compensation test Must report reimbursement as compensation on employee’s W-2; tax does not have to be withheld Plan can be discriminatory Copyright 2009, The National Underwriter Company Tax Implications Employee tax treatment Moving expense is an above-the-line deduction (. subtracted from gross income IF certain requirements are met: Distance test Time test Limits on types of expenses that are deductible Copyright 2009, The National Underwriter Company Tax Implications Distance test New main job is > 50 miles farther from home than old main job location was Time test Employee must work full time at least 39 weeks during first 12 months after arriving at new job location Copyright 2009, The National Underwriter Company Tax Implications Type of expenses deductible Only reasonable costs for: Packing, crating, moving household goods and personal | What is it? Companies reimburse employees’ moving expenses for job-related relocation. Reimbursements are taxable income to employee Employee can deduct moving expenses from gross income Copyright 2009, The National Underwriter Company When is it indicated? Consider when consistent with recruitment and staffing needs since moving expense reimbursement provides substantial benefits to employees Copyright 2009, The National Underwriter Company Advantages Can induce prospective employee to change jobs Larger companies can encourage employee mobility Is a tax-free form of employee compensation Employers have complete flexibility in plan design Copyright 2009, The National Underwriter Company Disadvantages Distance test requires new job to be at least 50 miles from employee’s former home to obtain deduction Expenses for house hunting or selling, buying, or leasing a residence are not deductible Copyright 2009, The National Underwriter Company Tax Implications Employer tax .
