Moving Expenses - Reimbursed by Employer (Lump Sum)

[ZoomnFinancial]

Client was reimbursed (a lump sum of $64k) by employer for moving expenses (MN to MI) that came through on W2 as wages and not on line 12. Going to claim the moving expenses deduction for client but where it gets tricky is the employer as part of the $64 reimbursed client for loss on sale of house in MN ($43k).

Total reimbursed - $64k

Amount for Loss on Sale of House - $43k

Other Reimbursed Expenses - $21k

Don't know what the client has spent as of yet on expenses but currently trying to find that out.

I assume I don't do anything with the $43k and client has to pay taxes on that since you can't take loss on sale of house.

[michaelmars]

i think you use that as additional sales price, not sure how to get it off of the wage line.

[MsTabbyKats]

Just my opinion....but the loss that they paid him for should be taxed as ordinary income on the W-2....and his actual moving expenses can be up to $21K.

[jklcpa]

The part of the reimbursement that is attributable to the loss on the sale of the house is taxed as wages as ordinary income. From 1.82-1(a)(5):

(a) Reimbursements in gross income

(5) Attributable to employment or self-employment. Any amount received or accrued from an employer, a client, a customer, or similar person in connection with the performance of services for such employer, client, customer, or similar person, is attributable to employment or self-employment. Thus, for example, if an employer reimburses an employee for a loss incurred on the sale of the employee's house, reimbursement is attributable to the performance of services if made because of the employer-employee relationship. Similarly, if an employer in order to prevent an employee's sustaining a loss on a sale of a house acquires the property from the employee at a price in excess of fair market value, the employee is considered to have received a payment attributable to employment to the extent that such payment exceeds the fair market value of the property.

How to report on Form 3903 depends on how the reimbursement was reported on W-2:

• If reimb is only in box 12 with code P, and moving expenses exceeded that amount, Form 3903 should report all allowable expenses and report the reimbursement.
• If the reimb is in box 12 is equal to the expenses, do not file Form 3903 to claim the deduction, since the TP has been fully reimbursed.
• If your reimb is split between box 1 (wages) and box 12, and expenses are more than what is in box 12, file Form 3903 with all expenses, but only report the reimbursements in box 12.
• If all of the reimbursement in box 1, file Form 3903 with all expenses, but do not report the reimbursements.

Edited March 2, 2014 by jklcpa
additional info

[michaelmars]

NICE INFO, THANKS