My wife took a new job last year. The employer paid the moving company for the move. We paid nothing out of pocket basically. Her W2 shows the amount paid to the movers in box 12 with a “P” designation. When filing, this amount is included as “income” according to our accountant. Is he correct or did the employer code it incorrectly?
Code P – Non-taxable reimbursements for employee moving expenses, if the amounts were paid directly to the employee.
The amounts were not paid to us so by definition of code “P” they are taxable? Did the employer code this correctly?
From the IRS
Moving expenses. Report moving expenses as follows:
Qualified moving expenses that an employer paid to a third party on behalf of the employee (for example, to a moving company) and services that an employer furnished in kind to an employee are not reported on Form W-2.
Qualified moving expense reimbursements paid directly to an employee by an employer are reported only in box 12 of Form W-2 with code P.
Nonqualified moving expense reimbursements are reported in boxes 1, 3, and 5 of Form W-2. These amounts are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable).
Thanks.
in the end it probably doesn’t matter, because if its in box 12 then you didn’t (and don’t) pay taxes on it as income. As far as I can see, the only difference would be in the record keeping requirement. I.e. if it says $8500 in box 12 for Code P, I would make sure that I had a receipt that said $8500 for that tax year.
Our accountant’s software is putting it down as income and changing our tax amount.
Taxable.
Check as the employer typically pays the gross up for moving (and incentives). I’ve relo’d 3 times for work and it works out this way.
Its not that simple. See my previous post. There are qualified and non-qualified expenses. The cost of movers is not taxable, the cost of selling a home is. The OP was specifically asking about moving expenses that were qualified (Code P) and thus, Not Taxable.
We are talking about different items. It appears your talking about move expenses, while I’m talking about employer’s relo benefits and the tax implications.
Long story short, the benefit provided from the employer is considered taxable income. Yes, there are some small deductions that can be itemized which might not have been included, but really depends upon the OP’s benefit and if gross up was provided.
The OP said “****The employer paid the moving company for the move. We paid nothing out of pocket basically. Her W2 shows the amount paid to the movers”.
The money that the company paid the movers is not taxable. The OP never got any money, thus, no “gross up”. If they got real-estate or, DMV expenses, “a disturbance allowance”, etc, those benefits would be taxable (i.e. not a qualified moving expense).
I’m not sure why and where we have a disconnect. “Google” relocation and taxable income…you’ll find hundreds of articles on the subject.
While the amount the employer paid to the movers is not taxable, it DOES count towards an employees taxable income.
ie. You make $100,000 salary and the move was $10k…the employers tells the government that you made $110,000 and you are taxed on that amount. Typically, the employer will pay the gross up (or the actual estimated tax burden), which then limits your ability to deduct the $10k in moving expenses. You can itemize specific stuff…but its minimal compared to the actual amount of deduction you could take as if you paid for the move direct.
So…in most cases, you are better off settling for a higher salary and paying the move expenses out of pocket and taking the full tax advantage.
It*** does not*** count towards their taxable income, if it did, it would be taxable.
The employer is not to report qualified moving expenses (i.e. what is paid to a mover) on the W2.
So if income is $100K and moving expenses (which are qualified, in this case paid directly to the moving company) are $10K, gross income would be $100K. There would be no mention of the moving expenses on the W2.
If the $10K is paid to the employee, for a qualified moving expense, it would be listed as $10K in box 12 as Code - P, but NOT included in Box 1,3, or 5.
See the IRS website for confirmation, but I’ll post again below (these are the employer instructions on filling out a W2).
Moving expenses. Report moving expenses as follows:
Qualified moving expenses that an employer paid to a third party on behalf of the employee (for example, to a moving company) and services that an employer furnished in kind to an employee are not reported on Form W-2.
Qualified moving expense reimbursements paid directly to an employee by an employer are reported only in box 12 of Form W-2 with code P.
Nonqualified moving expense reimbursements are reported in boxes 1, 3, and 5 of Form W-2. These amounts are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable).
All good stuff, but that isn’t how employer paid move expenses are written. I have my full Cartus brochure and 10 pages from a Fortune 10 company which I could post which explains it…
I’ll see if I can clense and post my latest move later tonight. It will show the breakdown b/w taxable/non-taxable expenses along with the taxable income increase noted on w-2…
Maybe your move was not considered “qualified”. Not sure why. I have had a number of relocations, 2 international (relo each way) and 3 nationally. I have paid taxes (through the grossed up method) on lots of things, but never on the actual cost of movers.
It would not surprise me if Cartus and your company screwed something up, or (more likely) it was just easier for them to do it the way that they did it. I know that the MI Group, KPMG and my company, (not F10, but a $1B) screwed up statutory aspects of my relo…
Once again, we’re talking about (2) separate issues…
My point is that it increases your taxable income, regardless of whether you can deduct it or not. If it’s reported on a W-2, it’s income! This effects your FDIC payment.
So…you can deduct the cost, but you can not bypass the increased tax burden from a larger taxable income.
The IRS instructions are crystal clear, no ambiguity. If the company pays the moving company (which is different than a relocation company) directly, these costs must not be reflected on the W2. If the company pays you and has you pay the moving company, the costs/reimbursement is ONLY reported in Box 12, not in box 1,3,5 (the taxable boxes). UNLESS that move is not a qualified move (time and distance restrictions*). If the costs are not to be reflected on the W2, how are they taxable? If you get more than actual costs, you need to pay taxes on the difference. If you get less than actual costs, you get a deduction.
I’m not sure what you’re trying to say with the FDIC comment, but I’m sure that the FDIC has nothing to do with taxes.
I think that you are trying to say that its income, but then you can deduct the cost subject to the 2% floor, so you’re out the difference, but that’s not the way it works. You may be trying to say that it puts you into a higher tax bracket, which yields a higher tax burden. This would also be incorrect, because tax burden is based upon bottom line income (line 43 1040), not top line income. You can pretty easily run the scenarios in any tax package and verify what I’m saying.
*Distance requirement, new address to new work must be 50miles more than old address to new work. Time requirement = worked or plan to work full time for at least 39 weeks following relocation. And, the move was work related (you started work within one year before or after you moved and the distance between your new residence and new place of employment is less than the distance between your former residence and your new place of employment.)
If that’s the case…then why is there a thread on the topic?
Because the company filled out the OPs W2 incorrectly. They filled it out as if they reimbursed him for the moving expenses that he paid. If they did it this way, he would have a corresponding deduction on the back-end that verifies the Box 12 entry and either (a) cancels it out (b) taxes him for the over-reimbursement (c) gives him a deduction for the under-reimbursement. Since they paid the movers directly, it looks like he got 12K, but paid nothing, and the 12K would thus be taxable.
This is getting very silly.
Read up and you’ll find which portion is most definitely going to be showing up as taxable income…
http://www.google.com/search?hl=en&q=relocation+expenses+taxable+income