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UPDATE: IRS Says Benefits Paid in 2018 for 2017 Employee Relocations will not be Taxable

Published Date

Two men reviewing relocation forms

On September 21, the U.S. IRS clarified an issue related to the 2017 U.S. Tax Cuts and Jobs Act that had been unresolved since the law was enacted last December. That statute ended the moving expense deduction/exclusion from income effective January 1, 2018 through December 31, 2025.

In Notice 2018-75, the agency stated that qualified moving expense reimbursements paid in 2018 to an employee, or to a third party on behalf of that employee, for moves that took place in 2017 would be excludable from income, as they were under prior law.

In the notice, the IRS instructed employers who had included these benefits as taxable wages in 2017 to use an adjustment or refund claim process.

 

Impact for Mobility

While this notice does not change the fundamental direction of the new law (work-related relocation expenditures paid by an employer now represent taxable income for the employee), it does clarify this specific transition issue.

As Worldwide ERC® reported, companies sought to address this matter earlier this year in ways they felt would comply with the guidance the IRS ultimately would supply. Now, based on this Notice, they have the opportunity to adjust those actions if necessary.

 

For Graebel clients

Over the next few weeks, we’ll audit our clients’ move-related expenditures for their employees on U.S. payrolls to identify payments made in 2018 for relocation activity that took place in 2017. These will now be recorded as excludable benefits rather than taxable. We’ll recommend appropriate adjustments before year-end cut-off dates.

Graebel clients are encouraged to contact their account representative if they have any questions or concerns.

Graebel Companies Inc. and its affiliated entities are not tax or legal advisors. This information is provided for informational purposes and doesn’t constitute tax or legal advice. Individual circumstances may vary. Consult with your tax advisors to discuss specific tax situations and how tax laws and rulings may affect your organization.