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Reimbursed Moving Expenses and Form W-2

Question:

Are moving expenses that are paid to a new employee of a church reportable on Form W-2?

Answer:

The answer to this question hinges on whether the moving expenses were qualified or non-qualified. If the moving expenses were qualified moving expenses, the amounts reimbursed to the employee are reported only in box 12 of Form W-2 with code P. If the moving expenses are non-qualified, then amounts are reported in boxes 1,3, and 5 of Form W-2 as taxable income. These amounts are also subject to income tax withholding. (Form W-2 Instructions) Of course as explained within other posts in this blog, boxes 3 and 5 are blank when an employee is a minister.

This answer if only helpful if the distinction between qualified and non-qualified moving expenses is made. Qualified moving expenses are expenses incurred under an accountable plan.

"To be an accountable plan, your employer's [moving expense] reimbursement arrangement must require you to meet all three of the following rules.
  • Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home.
  • You must adequately account to your employer for these expenses within a reasonable period of time.
  • You must return any excess reimbursement or allowance within a reasonable period of time."

This comes from Publication 521 which readers should access for more information on moving expenses.

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