This section explains how to report a reimbursement (including advances and allowances) on your tax return. It covers reimbursements for any of your moving expenses discussed in this publication. It also explains the types of reimbursements on which your employer must withhold income tax, social security tax, and Medicare tax.taxmap/pubs/p521-003.htm#en_us_publink100043420
If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later.
Your employer should tell you what method of reimbursement is used and what records are required.taxmap/pubs/p521-003.htm#en_us_publink100043421
To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.
- Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home.
- You must adequately account to your employer for these expenses within a reasonable period of time.
- You must return any excess reimbursement or allowance within a reasonable period of time.
You adequately account for your moving expenses by giving your employer documentation of those expenses, such as a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it. Documentation includes receipts, canceled checks, and bills. taxmap/pubs/p521-003.htm#en_us_publink100043423
What constitutes a "reasonable period of time" depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.
- You receive an advance within 30 days of the time you have an expense.
- You adequately account for your expenses within 60 days after they were paid or incurred.
- You return any excess reimbursement within 120 days after the expense was paid or incurred.
- You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.
This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that you adequately accounted for to your employer within a reasonable period of time. taxmap/pubs/p521-003.htm#en_us_publink100043425
You must be required to return any excess reimbursement for your moving expenses to the person paying the reimbursement. Excess reimbursement includes any amount for which you did not adequately account within a reasonable period of time. For example, if you received an advance and you did not spend all the money on deductible moving expenses, or you do not have proof of all your expenses, you have an excess reimbursement. taxmap/pubs/p521-003.htm#en_us_publink100043426
If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. Instead, your employer should include the reimbursements in box 12 of your Form W-2. taxmap/pubs/p521-003.htm#en_us_publink100043427
You lived in Boston and accepted a job in Atlanta. Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta.
Your employer will include the reimbursement in box 12 of your Form W-2. If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later).taxmap/pubs/p521-003.htm#en_us_publink100043428
You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses.
If your deductible expenses are reimbursed under an otherwise accountable plan but you do not return, within a reasonable period, any reimbursement of expenses for which you did not adequately account, then only the amount for which you did adequately account is considered as paid under an accountable plan. The remaining expenses are treated as having been reimbursed under a nonaccountable plan (discussed below). taxmap/pubs/p521-003.htm#en_us_publink100043429
You may be reimbursed by your employer for moving expenses, some of which are deductible expenses and some of which are not deductible. The reimbursements you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are treated as paid under a nonaccountable plan (see below) and are included in your income. If you are reimbursed by your employer for the taxes you must pay (including social security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement as well, and it is treated as paid under a nonaccountable plan. taxmap/pubs/p521-003.htm#en_us_publink100043430
A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans.
In addition, the following payments will be treated as paid under a nonaccountable plan.
- Excess reimbursements you fail to return to your employer.
- Reimbursements of nondeductible expenses. See Reimbursement of nondeductible expenses, earlier.
If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses.
If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer.
Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2. taxmap/pubs/p521-003.htm#en_us_publink100043431
To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as pay in box 1 of your Form W-2.taxmap/pubs/p521-003.htm#en_us_publink100043432
Do not include in income any moving expense payment you received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. These payments are made to persons displaced from their homes, businesses, or farms by federal projects. taxmap/pubs/p521-003.htm#en_us_publink100043433
Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements included in income, later. taxmap/pubs/p521-003.htm#en_us_publink100043434
Your employer should not include in your wages reimbursements paid under an accountable plan (explained earlier) for moving expenses that you:
- Could deduct if you had paid or incurred them, and
- Did not deduct in an earlier year.
These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 12 of Form W-2.
You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income (see Accountable Plans under Types of Reimbursement Plans, earlier).
If you receive a reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement in income on line 21 of your Form 1040. Your employer should show the amount of your reimbursement in box 12 of your Form W-2. taxmap/pubs/p521-003.htm#en_us_publink100043437
Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. See Nonaccountable Plans under Types of Reimbursement Plans, earlier. Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained earlier) for meals, househunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer. taxmap/pubs/p521-003.htm#en_us_publink100043438
If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. Your employer must treat any remaining amount as taxable wages and withhold income tax, social security tax, and Medicare tax. taxmap/pubs/p521-003.htm#en_us_publink100043439
If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. It depends in part on whether or not income tax is withheld from your regular wages, on whether or not the reimbursements and allowances are added to your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate.
Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances in your regular wages. The employer can withhold income tax on supplemental wages at a flat rate which may be different from your regular tax rate.taxmap/pubs/p521-003.htm#en_us_publink100043440
If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax.