ISSUE

The “Tax Cuts and Jobs Act” suspended the ability for an employer to pay for or reimburse moving expenses on a non-taxable basis for all employees (with the exception of some members of the U.S. Armed Forces on active duty).  Accordingly, there may have been some erroneous reporting on 2018 Form W-2.

 

SITUATION

Denali Christian College (DCC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

DCC’s accounting team called us about a question they’d received from a new professor who just relocated to their area.  This professor had also moved in 2018 and received a Form W-2 from her previous institution that had an amount in Box 12 with a “P” code.

“Our new professor is asking us what she should do about reporting that amount on her 2018 Form 1040, and we have no idea?”

We tell them that the IRS has just released specific guidance on that issue within the past few weeks.  Ultimately, she can “disregard” that amount.  However, the question arises as to whether that “Box 12” amount should have been included in the new professor’s 2018 taxable compensation on her W-2 and was omitted.  It may be wise for her to enquire of her previous institution – that provided the 2018 Form W-2 – about how these moving expenses were reported.

For more on the change in moving expense rules, take a look at “Tax Tips” from 9/26/18 entitled “Update on Suspended Moving Expenses.”  It can be found at:  https://www.abhe.org/update-on-suspended-moving-expenses/

 

RULES

From IRS website, “Clarification on Code P Reporting in Box 12 of the 2018 Form W-2”:

Some employers have reported nontaxable reimbursements for 2017 moves and other reimbursements under code P for 2018. The only amounts to be reported under code P for 2018 are excludable moving expense reimbursements paid directly to a member of the U.S. Armed Forces who moves per a military order and incident to a permanent change of station. Employers should not report any other amounts under code P for 2018.

Employers who reported an amount in Box 12, code P, for 2018 that should not have been reported may inform their employees to disregard that amount.  No corrected forms need to be filed with the SSA or the IRS or need to be furnished to employees for 2018 to remove amounts reported under code P for 2018 that should not have been reported. These employers can also inform their employees to omit the Box 12, code P, amount when entering their Form W-2 information into tax return preparation software.

 

BOTTOM LINE

  • The Tax Cuts and Jobs Act suspended the “non-taxability” of moving expenses for most employees through 2025.
  • Some employers may have “mis-reported” moving expenses on 2018 Form W-2’s.
  • The IRS has issued clarifying guidance for a specific issue with respect to erroneous reporting.
  • If your institution reported moving expenses for employees in 2018, you should carefully review that reporting to ensure that corrected Form W-2’s are not required with respect to the change in taxability of moving expenses.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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