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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My employer paid me $ 1250.00 for relocation costs.

Customer Question

My employer paid me $ 1250.00 for relocation costs. They cut me a check the day I arrived in to town. Now their accountant tells them they needed to tax me on this. Do I have to pay the taxes immediatly? Or can I pay them at the end of the year?
Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

Hello Ben,

There are several different rules that determine how the reimbursement from your employer should be treated. The IRS defines a reimbursement as either being paid under the "accountable" mthod or "non-accountable" method. The basic difference is in whether or not you keep a record of your exact expenses and return any monies that your employer over-reimbursed you. Basically many of your moving relocation expenses are deductible on your return, so any expenses you have incurred will probably offset any reimbursement given to you by your employer. IRS Publication 521 really gives clear details on how to handle the reporting of moving expenses and reimbursements from employers. It is unlikely that you will actually end up owing tax when it is all said and done, but in any case, this will be reportable on next year's tax return and is not something you need to handle immediately. Here is a link to Pub. 521 for your reference.

http://www.irs.gov/pub/irs-pdf/p521.pdf

If this answer has been helpful, please press the "Green Accept" button. Positive feedback is also greatly appreciated. Thanks for the question and have a great day.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 4 other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Can you give me something to reference so I can show my employer that I dont have to pay the taxes immediatly? Can I pay the taxes at the end of the year or not? I cant really understand all of the info on the link you gave me.
Expert:  Merlo replied 6 years ago.

Hello again,

The previous post I made regarding the fact that you will not be accountable for this until next year's return, refers to your personal tax return only. Your employer may or may not withhold taxes from the reimbursement they are giving you, depending on whether or not the reimbursement was made under the accountable or non-accountable plan. If this was made to you under an accountable plan, then taxes should not be withheld. Here is a link to the IRS rules that you can print out and go over with your employer. http://www.irs.gov/publications/p521/ar02.html#d0e1725

Even if your employer does end up withholding some tax from the payment he makes to you, at the end of the year you may still be eligible for a refund for all or some of the taxes withheld. It really will depend on how much your employer paid you in relation to what your actual expenses were.

If you found this answer helpful, please press the "accept" button. Thanks again.

Customer: replied 6 years ago.
Is there anyway to put off paying taxes on this until the end of the year?
Expert:  Merlo replied 6 years ago.
If the payment your employer made to you is considered to be a non-accountable type reimbursement, then they are required by the IRS to withhold taxes. If your employer considers this to be an accountable reimbursement, then taxes would not have to be withheld. You would have to read the various requirements in Publication 521 to clarify which type of reimbursement you received. I know the publication itself is fairly lengthy, but the section which describes the two different types of reimbursements is fairly easy to get through.

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