S Corp Moving Expenses

[carrietoddbusinessally]

My client is the owner of an S Corp and is paid by salary. He is moving and some expenses are being paid from the company card. He also wants to be reimbursed for other expenses he's paid for personally. Are the expenses all tax deductible for the S Corp business? Would these moving expenses paid by the company be considered taxable income for him? If yes - where on the W-2 would the moving reimbursement go? Thanks!

[dclick]

Thanks for reaching out to us today. 

The Tax Cuts and Jobs Act of 2018 revamped how moving expenses were treated (reimbursements and payments towards these amounts as well). 

Qualified Moving Expenses Reimbursements No Longer Excluded from Employees’ Income, with Two Exceptions

For 2018 through 2025, employers must include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

Exception 1: Members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:

• They are on active duty
• They move pursuant to a military order and incident to a permanent change of station
• The move expenses would qualify as a deduction if the employee didn’t get a reimbursement

Exception 2: Employers may exclude from wages any 2018 reimbursements to or payments on behalf of employees for moving expenses incurred for a move that took place prior to January 1, 2018, and which would have been deductible had they been paid prior to that date. See Notice 2018-75

So these amounts will all be included as taxable wages for the year. 

Here is an IRS Page on the topic, created to handle the transition from 2018 and before to 2018 and beyond treatment of these items:

https://www.irs.gov/newsroom/employer-update

Additionally, there is no deduction for out of pocket expenses you pay towards the move that are unreimbursed any longer. Here is a wonderful TurboTax article on the topic:

https://turbotax.intuit.com/tax-tips/jobs-and-career/guide-to-irs-form-3903-moving-expenses/L6CwmGm3...

To answer the last part of your question, the moving expense reimbursement would be reported in Box 12 of the W-2.

I hope this helped, and thanks again for reaching out!

-Dennis

[carrietoddbusinessally]

That's super helpful - thank you! So both answers are yes - expenses are deductible for the business and taxable income for the S Corp owner.