Tax Withholding and Estimated Tax

Your employer must withhold income tax, social security tax, and Medicare tax from reimbursements and allowances paid to you that are included in your income. See Reimbursements included in income, later.

Reimbursements excluded from income. Your employer should not include in your wages reimbursements paid under an accountable plan (explained later) for moving expenses that you:

1. Could deduct if you had paid or incurred them, and
2. Did not deduct in an earlier year.

These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Your employer should report these reimbursements in box 13 of Form W-2.

You cannot claim a moving expense deduction for these reimbursed expenses (see Reimbursements under How To Report, later).

Expenses deducted in earlier year. If you receive reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement on line 21 of your Form 1040. Your employer should show the amount of your reimbursement in box 13 of your Form W-2.

Reimbursements included in income. Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even if they are for deductible moving expenses. See Reimbursements under How To Report, later. Your employer must also include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. This includes amounts your employer reimbursed you under an accountable plan (explained later) for meals, househunting trips, and real estate expenses. It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer.

Reimbursement for deductible and nondeductible expenses. If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. Your employer must treat any remaining amount as taxable wages and withhold income tax, social security tax, and Medicare tax.

Amount of income tax withheld. If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. It depends in part on whether or not income tax is withheld from your regular wages, on whether or not the reimbursements and allowances are combined with your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate.

Estimated tax. If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. For details about estimated tax, see Publication 505, Tax Withholding and Estimated Tax.