Moving
Expenses
Employers may ask employees to move to a different company
location. If the employer pays a third party or reimburses the moving employee
for actual costs incurred, there is no reportable income to the employee. This
applies only if the employee's new workplace is at least 50 miles further from
his or her residence than the former workplace; and the employee must work out
of the new location for at least 39 weeks during the 12-month period following
the move. Otherwise, the move transaction will have the appearance of being a
simple compensation by the employer to the employee, who uses the funds to move
to a new location while still working at the same place.
If the employer pays the employee a fixed amount to complete the
move, and if the actual expenses incurred are less than the payment, then the
difference is reported as income to the employee.
Example. The Fragrant Perfume Company asks
its lead software developer to move to New York City, where she can create a new
logistics system for herbs being shipped through the New York port facilities.
The new location is 250 miles away from her previous position at company
headquarters. The company pays her $20,000 to complete the move, against which
she can substantiate incurred expenses of $16,000. The difference of $4,000 is
gross income, from which the company must deduct payroll taxes.