Employer payments covering an employee\'s moving costs. Since the 2017 Tax Cuts and Jobs Act, all relocation reimbursements are fully taxable wages subject to income tax withholding and FICA.
Why Relocation Reimbursement matters for employers
Before the 2017 Tax Cuts and Jobs Act, employers could reimburse qualified moving expenses tax-free. That exclusion was eliminated, and now all relocation payments are fully taxable wages. This means any amount paid to help an employee move must be run through payroll, subjected to income tax withholding and FICA, and reported on the W-2. Many employers gross up relocation payments to offset the tax impact for the employee, which itself is additional taxable income.
Employers who pay relocation costs outside of payroll risk creating unreported taxable wages, leading to IRS underpayment penalties and back FICA assessments. The correct approach is to include relocation reimbursements in the applicable payroll cycle and withhold accordingly. BEG manages all relocation payment processing as part of fully managed payroll.
How BEG handles Relocation Reimbursement for clients
BEG Managed Payroll handles Relocation Reimbursement as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to Relocation Reimbursement on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage Relocation Reimbursement themselves?
No. A managed payroll provider handles Relocation Reimbursement as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if Relocation Reimbursement is handled incorrectly?
Errors related to Relocation Reimbursement can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle Relocation Reimbursement for managed payroll clients?
BEG tracks, calculates, and remits everything related to Relocation Reimbursement as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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