Relocation benefits reported on the following year's W-2

[aaherrera]

I changed jobs in the 4Q of 2020, and the new employer paid for my relocation expenses (Edit: several thousand were reimbursements to me in 2020, but most were payments on my behalf - e.g. to the moving company, for flights and accommodations through the company's travel site, etc.)  My start date was at the end of October, and I had finalized my home purchase and "completed" the relocation by the middle of December.  When I received my 2020 W-2, the relocation amounts were not included, but were on the 2021 W-2.  Turns out, in 2020, I was well below the threshold for the child tax credit and in 2021, I was above the phase out limit.  Had the relocation expenses been reported as 2020 income, I would have been eligible for the full child tax credit for both 2020 and 2021, instead I was phased out of nearly half the credit for 2021.  I bet I know the answer, but is there a way to get the relocation amounts applied to the 2020 income?  I imagine the company reports everything later than when the costs were actually accrued, so maybe they didn't officially pay those accounts until 2021, in which case, maybe I'm out of luck.  Just trying to see if I could request confirmation for when the expenses were incurred, if I could amend my 2020 return with those amounts included.

[ErnieS0]

The IRS requires you to report income in the year you received it, so payments made in 2021 for a 2020 taxable relocation benefit would be reported on the 2021 return.

If you actually received money in 2020 then you can speak with your company about correcting your 2020 and 2021 W-2s.

Moving expenses are no longer deductible unless you are active duty military.

The IRS uses a concept called constructive receipt.

Income is constructively received when an amount is credited to your account or made available to you without restriction.

Example. You are a calendar year taxpayer. Your bank credited, and made available, interest to your bank account in December 2021. You did not withdraw it or enter it into your books until 2022. You must include the amount in gross income for 2021, the year you constructively received the interest income.

Constructive receipt

[aaherrera]

Back in early 2021 when I inquired about the timing, I believe there was some comment from the company that said any expenses incurred or paid on my behalf after October of 2020 would be counted as part of 2021 income.  But if that was just a company policy, might there be a way for me to request that they split the money by year and issue me corrected W2s?  Since I wasn't formally reimbursed for most of the expenses (i.e. the contracted directly with the moving company and the realtors/title companies), I don't yet have a formal record of the amounts, and I'm not sure they would provide me a timeline for when they were paid.  But, since my move was complete in mid-Dec, I could imagine some of the fees/amounts may have been paid in 2021, in accordance with their contracts with the other companies, if they had net 30-60 agreements for example.  I just want to know if the costs that were paid in 2020 should be provided in the year they were paid on my behalf, or if their policy trumps the timing.

[JamesG1]

Regardless of whether your company paid the expenses in 2020 or 2021, the 2017 Tax Cuts and Jobs Act changed the rules for claiming the moving expense tax deduction.

For most taxpayers, moving expenses are no longer deductible, meaning you can no longer claim this deduction on your federal return. This change is set to stay in place for tax years 2018-2025.

See this TurboTax Help.

[aaherrera]

Hi @JamesG1,

I'm not trying to deduct them in the formal sense of deductions. I’m trying to reduce my tax basis for 2021 by re-allocating money that was actually paid on my behalf in 2020. Essentially redistributing the relocation benefits across the 2 years, based on when the expenses were paid on my behalf. 

Thanks.

[KrisD15]

I think I understand what you are asking. 

No, there is nothing you (personally in the TurboTax program) can do to reallocate the income from one year to the last. Your employer would need to issue to you a corrected W2 for both 2020 and 2021. 

It sounds as if the company explained that payments made in 2021, although for services provided in 2020, would be reported on the 2021 W2. 

It is similar to working in December, but getting paid in January the next year.  The income is reported for the tax year the income was received.  

Since the Child Tax Credit is based on Modified Adjusted Gross Income, student loan interest payments and/or IRA contributions would not adjust your income on which the credit is based. 

@aaherrera

[aaherrera]

Sorry, maybe I haven't been clear.  The company made payments to me and on my behalf in 2020, but the relocation company set a cut-off date of Oct 31 for payments made after that date to be reported on my 2021 W2.  Because my entire relocation happened after Oct 31 and before Dec 31, I'm trying to see if it might be possible to request the company allocate the amounts reported on my 2021 W2 across the two years as they were actually paid, using Dec 31 as the date of differentiation rather than Oct 31.  I definitely did find some reimbursement receipts dated for several thousands of dollars in 2020, but without full visibility into which other payments might have been made on my behalf behind the scenes, I'm not sure how much of an impact this would have.  As I'd mentioned, I'm trying to spread the benefit across the years, as I'm sure there are some payments that were legitimately held over to 2021.  I'm also trying to confirm with someone that the IRS rules of splitting the payments at Dec 31 would trump the policy of the relocation company and I wouldn't be wasting my time in pursing a corrected W2.  If it could get me another 1k+ in child tax credit, then I feel like the time is worth it, as any correction to 2020 shouldn't affect my overall tax basis for the two years.

@KrisD15 

[DMarkM1]

The payments can be split over the two years, but that would need to be done via corrected W2s from the company as @KrisD15 mentions.  When the company issues W2s they are issued to the employee and the IRS.  When the employee files the tax return the IRS is reconciling with those income documents from the employers. They need to match.

[aaherrera]

Resolved: I reached out to the company and they reference the IRS’s Special Accounting Rule, which allows benefits paid in the last two months of the year to be accounted for in the following year. Because of this, they will not issue me a corrected W-2, as their policy is in line with IRS rules.