Deduction of employer-paid moving expense

[ebrahimm777]

I changed my job during 2019 and my new company paid for my moving expense. This payment has been considered as part of my total income (per my paycheck) which is reported in box 1 of my W2. In addition, my paycheck mentions a "deduction" for this relocation expense (with a dollar value around 60% of the total moving expense), and this second number is reported in box 14 of my W2 with a "RELOC" code.

So, I'm wondering whether the second value reported in box 14 (or even the first number, i.e., the total relocation amount, which is part of my wage in box 1) is something I can separately claim under moving expenses, or is it somehow already considered under my W2 report and/or the standard deductions of the TurboTax settings?

[Opus 17]

I don’t know what the company put in box 14, and box 14 is informational only, it has no effect on your tax return. W-2 employees are no longer allowed to deduct moving expenses, and employers are not allowed to provide moving expenses tax-free. The only way that your employer can help to pay your moving expenses is if they consider it part of your taxable wages, like a bonus.  There is nothing that you can do to deduct or adjust from that number.

[ebrahimm777]

Hi @Opus 17 , all.

Thanks @Opus 17 for the response. I figured out that, actually, my company has provided me with "relocation tax assistance". So, what is reported in my W2 box 14 with code "RELOC" is the actual relocation expense that is incurred, and the total relocation amount which is reported as part of my wages in box 1 of my W2 is in fact the sum of that actual incurred relocation expense plus the tax assistance they have provided. Please note, there is nothing related to moving expenses reported under box 12 of my W2.

So, I'm reading in some websites that "You should also take a moving deduction if your employer included your reimbursement with wages in box 1 of Form W-2". Is this true, and does it apply to my case?

That is, can I report any/some/all of: (a) the total  moving expense reported under box 1; (b) the actual moving expense reported in box 14; and/or (c) the tax assistance; as a deductible moving expense in my tax return?

Also, is there a difference between the federal tax vs. state tax (California, where my new company is) for this deduction, if applicable at all?

[Opus 17]

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@ebrahimm777 wrote:

Hi @Opus 17 , all.

So, I'm reading in some websites that "You should also take a moving deduction if your employer included your reimbursement with wages in box 1 of Form W-2". Is this true, and does it apply to my case?

That is, can I report any/some/all of: (a) the total  moving expense reported under box 1; (b) the actual moving expense reported in box 14; and/or (c) the tax assistance; as a deductible moving expense in my tax return?

Also, is there a difference between the federal tax vs. state tax (California, where my new company is) for this deduction, if applicable at all?

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It doesn't really matter how your employer accounts for the payment internally.  If they call it $5000 moving assistance and $3000 tax assistance, or just an $8000 bonus, it is all taxable and should be included in your W-2 box 1 taxable wages.  

The federal deduction for moving expenses was eliminated in 2018 tax reform.  You may be looking at older articles.  (Also note, the contents of this forum were migrated from the old platform to the new one in 2019 and many older posts got re-dated, so unfortunately there are posts here with old info and new dates.)

You can list your moving expenses in turbotax, turbotax will apply them to your state tax return if that is still allowed in your state and if you would actually receive a tax benefit.  The amount of moving expenses you report is the actual amount you spent, regardless of whether it was more, less or the same as the employer payment.  If audited, the state will come looking to you to prove your expenses with receipts.  This web page has the old IRS rules for what moving expenses can be deducted.  Remember this deduction will not be allowed on your federal return even if you entered it, but it will carry over to state if allowed.

https://www.irs.gov/newsroom/deducting-moving-expenses

[davey111]

I changed to a federal job in Arizona and was a Florida resident and they paid for my moving expenses. I just received a corrected W2 from 2019.  Do I consider the W2 Florida income since I was still a Florida resident when the moving company was paid? (It was all taken care of behind scenes, I did not pay anything or receive a bill or receipt)

[ToddL99]

Treat the employer-paid moving expenses as FL income - the bulk of the work was performed in FL (packing and loading). 

[davey111]

On another thread people indicated since I moved to AZ and lived there in 2018 I need to claim it as AZ income as well.

[Opus 17]

It would not be state income in both states. It would be state income for the state in which you were residing when the money was actually paid, which does not necessarily reflect how it was used.

The tax concept is called domicile. Your domicile is your permanent residence. It is your main home, it is the place where you have the most allegiance, the most connections. A taxpayer can only have one domicile at a time no matter how many homes they own.  There is no single factor that determines domicile it depends on a combination of facts and circumstances. Some of the factors include where your doctor interest are located, your children’s school, your significant social interests such as clubs, other significant personal and financial relationships.

A person might change houses without changing their domicile, even someone on a long-term assignment in a different state who maintained a presence in their original state and intended to return, would be domiciled in their original state even if the temporary assignment was lengthy.  Changing your domicile requires not only that you physically move, but that you take affirmative steps to end you’re dumb sale in one place and begin it in another, such as changing doctors, re-registering to vote, getting a new drivers license, and so on.

So now the basic principle is simple. If you were domiciled in Florida when the funds were paid, then it is Florida income, no matter how the funds were used. If you were domiciled in Arizona when the funds were paid, then they are Arizona taxable income, no matter how they were used.

[davey111]

So my only domicile was Florida at the time. I didn't change my Domicile until December 2018 when I got an AZ driver's license and registered to vote. They packed on Nov 4th, and I drove across the country and started the new job on Nov 12, 2018. I have no idea when the funds were paid but the service was performed when I was a FL resident, so I assume payment was made beforehand.

So I should just amend my federal return and forget about amending AZ taxes as the service was performed when I was a Florida resident?

Thanks.

[Opus 17]

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@davey111 wrote:

So my only domicile was Florida at the time. I didn't change my Domicile until December 2018 when I got an AZ driver's license and registered to vote. They packed on Nov 4th, and I drove across the country and started the new job on Nov 12, 2018. I have no idea when the funds were paid but the service was performed when I was a FL resident, so I assume payment was made beforehand.

So I should just amend my federal return and forget about amending AZ taxes as the service was performed when I was a Florida resident?

Thanks.

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Since you moved and started your new job on November 12, and had no intention of returning to Florida, I would consider that the date you changed domiciles, even though some of the steps you had to take to make it effective occurred later.  You should have filed a part-year resident Arizona tax return that allocated to Arizona any wages paid after that date.   If your Arizona wages haven't changed, there's no need to file an amended Arizona return.

[davey111]

Ok, I thought I had this solved and another problem crept up. See this for details:

https://www.dfas.mil/civilianemployees/civrelo/Civilian-Moving-Expenses-Tax-Deduction/

I moved from Fl in November 2018 but they are including the moving company income on my 2019 taxes when I was an az resident for the whole year. They also sent me a bill for $2700 for the fica and Medicare expenses. Is it an error for them to lump it on the 2019 income as I'm sure the moving company was paid in 2018? Does it matter? Am I still considered a FL resident for this income?

[DianeW777]

No. You are considered an Arizona (AZ) resident for all of 2019.  All payments for you occurred in 2019, so all of these payments are included on your AZ resident return for 2019.  It doesn't matter when the company paid the moving company.

[davey111]

So how are they able to and and why did they include this on my 2019 w2 when it was 2018 income? Can I get them to change it? Doesn't seem correct or fair.

[Opus 17]

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@davey111 wrote:

So how are they able to and and why did they include this on my 2019 w2 when it was 2018 income? Can I get them to change it? Doesn't seem correct or fair.

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You don't actually know when the moving company was paid, you are only assuming it was in 2018. If the moving company was paid in 2019, that is 2019 income to you, and since you were an Arizona resident in 2019, it is Arizona taxable income.  I would suspect that the DoD did not pay the movers right away.  30 days would be a minimum, and longer is certainly possible.

If you want to assert that the moving company was paid before November 12, 2018, you will have to prove it.  One way would be to get a corrected W-2.  Another way would be to get a statement from the movers, if they can even find the documents and are willing to provide them. 

If you wanted to stake a consistent claim that this was 2018 income, you would have to file an amended 2018 return to report this as federal taxable income, and then file amended 2019 returns to remove it.  (Or, if these questions are the result of you getting a corrected W-2 and trying to figure out if you need to amend 2019, you would amend 2018 instead.). You would then expect to get a letter from Arizona assessing tax and penalties for not reporting the income for 2019 and paying tax.  You would have to explain your argument that this was income from before your change of domicile (November 12, 2018) and see if they accept it.  You would probably also get a letter from the IRS, and you would have to make the same explanation to them, with the added note that you reported the income and paid the tax on your 2018 return.  Either agency could rule against you. 

You would have to make the argument that the fact that the moving company moved you in 2018 proves constructive receipt of the money in 2018, even if the DoD didn't pay the movers until 2019.

https://www.law.cornell.edu/cfr/text/26/1.451-2 

[davey111]

Thanks for the help. Although this turned out to be pretty much the worst case scenario, at least I know what I'm supposed to do now.