Relocation Expenses Paid by Company

[fasteddie577]

Hi, my son worked in Delaware until June of 2023 and then was transferred to from Delaware to Texas, same company. The company he works for recently sent him a letter that stated that he should have reported the moving expenses they paid directly to him on his tax return. The letter they sent him, shows expenses paid to movers and expenses reimbursed directly to my son. The letter states that only the expenses paid directly to my son should be reported on his amended tax return. Is this correct, that only the funds paid directly should be reported? Thanks.

[rjs]

I assume that your son is an employee and gets a W-2 showing how much he was paid. Under current tax law (for 2018 through 2025) there is no special treatment for moving expenses for an employee. The money that the company paid is just additional pay. It should have been included in the wages on your son's W-2. If it was not, the company should have issued a corrected W-2 to include the moving expenses. Sending him a letter is a poor substitute for a W-2 or corrected W-2.

It makes no difference whether the company paid the mover or paid your son. All the money that they paid for moving expenses is additional pay and should have been included in his W-2.

Your son should first ask his employer for a corrected W-2 that includes all the moving expenses that they paid, both to him and to the movers. He can then file an amended return to make the corrections to the W-2. If the company refuses to issue a corrected W-2, he will have to file an amended return with a Substitute W-2, Form 4852, to show the correct amount that should have been reported as wages. If he is using TurboTax, he can create Form 4852 by checking the box on the Uncommon Situations screen in the W-2 entry section that says "Didn't get a W-2." (It also applies to an incorrect W-2.)

[Opus 17]

Not only should it have been reported on his W-2, it was subject to income tax withholding including social security and medicare tax.

Your son should ask for a corrected W-2.  Then he can file an amended return.  I suspect the company doesn't want to issue a corrected W-2 because they would have to pay both the employee half and employer half of social security and medicare tax, and they don't want to pay both halves.  Presumably they could garnish your son's wages for your son's half of those taxes, but they would still have to pay their own half.  

If they refuse to issue a corrected W-2, your son can file an amended return using form 4852, that will assess him his half of social security and medicare tax in addition to income taxes. 

But unfortunately, the ability for a business to cover employee moving expenses tax-free was eliminated for 2018 through 2025 by the 2017 tax reform law.  The company is correct that the reimbursement should have been taxable, although they are handling it in an incorrect way and they should really issue a corrected W-2. 

[fasteddie577]

Thank you for that explanation. I will follow up with my son on this. 

[fasteddie577]

Thank you very much for your response.