December 12, 2018
For businesses that have employees, there are changes to fringe benefits that can affect a business’s bottom line and their employee’s tax liabilities. One of these changes is to qualified moving expenses.
Under last year’s tax reform legislation, employers must include all moving expenses, in employees’ wages, subject to income and employment taxes.
Generally, 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 moving expenses would qualify as a deduction if the employee didn’t get a reimbursement
There is a transition rule under the new law. Under this rule, certain payments or reimbursements aren’t subject to federal income or employment taxes. This includes amounts that:
- An employer pays a third party in 2018 for qualified moving services provided to an employee prior to 2018.
- An employer reimburses an employee in 2018 for qualified moving expenses incurred prior to 2018.
Employers who have included amounts covered by the exception or the transition rule in individuals’ wages or compensation can take steps to correct taxable wages and employment taxes.
Circular E: Employer’s Tax Guide
Instructions for Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund
Subscribe to IRS Tax Tips