I have a client that is moving his employees from MI to AZ. He is reimbursing them for their costs. Including paying 2000.00 a month extra in which the employee can use either to pay on housing in AZ until home is sold in MI.

What I need to know is: It is my understanding that relocation is a benefit to the employee thus is considered in their wages and taxes are taken. Is this correct?

Secondly, if an employee wants the employer to pay him a set amount for moving expenses (thus is a bonus of sorts) with no mention of the amount being for moving expenses, can the employee at year end claim his moving expenses (based on tax guidelines of course)?

I would really appreciate the help. I have been looking everywhere for these answers. Not finding anything specific in AICPA, Accountants World, Tax sites etc.

Rebecca

I've been through two corporate moves, both of which involved the company paying me for some of my moving expenses.

First questions - yes, the relocation monies that were paid to me were included in my W2 at the end of the year, so I had to pay taxes on it. In both cases the company "grossed up" the amounts to alleviate the taxes - I think they added 25% (I don't remember the exact amount), and then withheld that amount from the check I got.

Second - yes, the employee can deduct the moving expenses on his taxes (subject to the limits the IRS puts on these deductions), but only of he is not reimbursed for the moving costs by the company. So the payment must be a true "bonus," and not tied directly to the actual amount of the moving expenses incurred by the employee, because then the IRS would argue that it's a reimbursed business expense that can not be deducted by the individual employee.

I am NOT an expert on this; just my best guess. I suggest posting this question in the Taxes forum and seeing what the profeesional tax experts think.