COMPTROLLER'S MEMORANDUM NO. 01 (1998-99)

SUBJECT: PAYMENTS OR REIMBURSEMENTS FOR EMPLOYEE MOVING EXPENSES

The Omnibus Budget Reconciliation Act of 1993 (OBRA'93) changed the requirements applicable to payments and reimbursements for employee moving expenses. Internal Revenue Service Announcement 97-77, 1997-33 I.R.B. (8/18/97) changed the employer reporting of moving expenses with the elimination of Form 4782 and changes to Form W-2 reporting effective for tax year 1998. The purpose of this memorandum is to consolidate those changes that became effective January 1, 1994 with those changes affecting calendar year 1998 and to explain the changes in our procedures for withholding taxes and for reporting reimbursements and payments made after January 1, 1998.

QUALIFIED MOVING EXPENSES

Payments to vendors or reimbursements to employees for certain moving expenses incurred after December 31, 1993, are "qualified moving expenses", and will not be reported as wages on Form W-2 if such expenses and the move itself meet the following conditions:

1. The expenses are reasonable expenses of moving household goods and personal effects from the former residence to the new residence, and for traveling (including lodging) from the former residence to the new place of residence;
   
2. The expenses do not include any expenses for meals;
   
3. If the move represents the commencement of work by the taxpayer at a new principal place of work located outside the United States and its possessions, the reasonable expenses may also include those for moving household goods and personal effects to and from storage, and of storing such goods and effects for part or all of the period during which the new place of work continues to be the taxpayer's principal place of work;
   
4. The taxpayer's new principal place of work is at least 50 miles farther from his former residence than was his former principal place of work, or if the taxpayer had no former principal place of work, is at least 50 miles from his former residence; and
   
5. The employing agency reasonably believes, at the time of payment or reimbursement of moving expenses, that during the 12-month period immediately following his arrival in the general location of his new principal place of work, the taxpayer will be a full-time employee, in such general location, during at least 39 weeks.

The above are Internal Revenue Code (IRC) criteria for determining qualified moving expenses. Refer to Section 132, IRC for additional information.Section 60L-9, Florida Administrative Code, (F.A.C.), establishes moving expense expenditures' eligibility for payment by the agencies as defined in Section 216.011(1)(kk), Florida Statutes. Moving expenses for the entities of the Judicial Branch as defined in Section 216.011(r), Florida Statutes, are governed by Section 10 of the Florida State Courts System Personnel Regulations Manual.

NONQUALIFIED MOVING EXPENSE

Payments and reimbursements that are nonqualified and therefore taxable include the following:

• pre-move house hunting trips;
• temporary living expenses in the general area of the new workplace;
• any meals connected with the relocation
• mileage in excess of $.10 per mile (Please note that this amount is less than the amount allowed under Section 112.061, Florida Statutes.)

FORM 4782, EMPLOYEE MOVING EXPENSE INFORMATION

Effective for tax year 1998, the Internal Revenue Service has eliminated Form 4782, Employee Moving Expense Information. The Bureau of State Payrolls will discontinue this form beginning with tax year 1998 and instead will include payment and reimbursement information by earning code on the annual Employee Payroll Information Statement distributed with Forms W-2 that employees will receive in 1999. Employing agencies may provide similar information to employees in any format they wish if they deem it helpful to employees.

FORM W-2, EMPLOYEE WAGE AND TAX STATEMENT

With the elimination of Form 4782, the IRS has simplified the reporting of qualified moving expenses on Form W-2. Reporting for tax year 1998 will reflect the following:

• Qualified moving expenses paid to a third party on behalf of the employee (e.g., to a moving company) and services that an employer furnishes in kind to an employee will not be reported at all on Form W-2.
• Qualified moving expense reimbursements paid directly to an employee will be reported in Box 13 and identified with Code P. These amounts are not taxable income and will not appear in box 1 of Form W-2.
• Other moving expenses (nonqualified moving expenses), including payments made directly to a third party and payments made directly to the employee, will continue to be included in wages (Form W-2, box 1) and are subject to income tax withholding and social security and Medicare taxes.

VOUCHER REQUIREMENTS

Prior to incurring or allowing an employee to incur moving expenses, universities and other agencies should review the requirements for payment.Section 60L-9, F.A.C., establishes moving expense expenditures' eligibility for payment by the agencies as defined in Section 216.011(1)(kk), Florida Statutes. Moving expenses for entities of the Judicial Branch as defined in Section 216.011(1)( r), Florida Statutes, are governed by Section 10, of the Florida State Courts System Personnel Regulations Manual.

Vouchers requesting payment for moving expenses must contain sufficient information for the agency to make a determination of the proper coding of the payment for taxation and reporting. This should include the locations of the former and new principal places of work and residence, and the distances between them. If the employing agency does not reasonably believe, at the time of submission of the payment request, that during the 12-month period immediately following the employee's arrival in the general location of his new principal place of work, the employee will be a full-time employee, in such general location, during at least 39 weeks, the voucher request should include a statement regarding this determination.

Currently object code 2800 - Employee Moving Expenses, is used for payments for moving expenses. Effective immediately, universities and other agencies should discontinue using this code and begin using the following new object codes. Object code 2800 has been inactivated and may not be used for processing payments. This change will not affect the recording or reporting of payments already made.

• Object Code 2810 Qualified Moving Expenses - Vendor Eligible costs, determined to be qualified moving expenses as described above, for packing and shipping household goods or privately owned mobile homes, and travel expenses for state employees for authorized relocation expenses paid to a third party.

• Object Code 2820 Qualified Moving Expenses - Employee
• Eligible costs, determined to be qualified moving expenses as described above, for packing and shipping household goods or privately owned mobile homes, and travel expenses for state employees for authorized relocation expenses paid directly to an employee.

• Object Code 2830 Nonqualified Moving Expenses - Vendor
• Eligible costs, determined to be nonqualified moving expenses as described above, for packing and shipping household goods or privately owned mobile homes, and travel expenses for state employees for authorized relocation expenses paid to a third party.

• Object Code 2840 Nonqualified Moving Expenses - Employee
• Eligible costs, determined to be nonqualified moving expenses as described above, for packing and shipping household goods or privately owned mobile homes, and travel expenses for state employees for authorized relocation expenses paid directly to an employee.

The payment of moving expenses to vendors, object codes 2810 and 2830, must include the employee as the sub-vendor. This is essential for the reporting of moving expense information to the IRS and employee and for the taxation of non-qualified moving expense payments.

These new object codes have been established to work in conjunction with the following payroll earnings codes to facilitate the reporting and taxation of employee moving expenses.

• Earning Code      9194     Qualified Moving Expenses              Vendor
• Earning Code      9195     Qualified Moving Expenses              Employee
• Earning Code      9196     Nonqualified Moving Expenses        Vendor
• Earning Code      9197     Nonqualified Moving Expenses        Employee

The reimbursement or payment for moving expenses that are not "qualified moving expenses", object codes 2830 and 2840, will be reported as wages on Form W-2 and will be subject to employment taxes. These taxable values will be obtained from the vendor payment system and included with the employees' earnings through the employee records adjustment process.

Due to payroll systems limitations the Comptroller's Office cannot include these taxable values with the employees' regular salary payment and therefore cannot withhold income and FICA taxes programmatically. This process collects the FICA taxes on the next regular payroll after the employee record update but does not collect income taxes. Agencies should notify employees having nonqualified moving expenses of this additional tax liability so that they may adjust their Form W-4, Employee's Withholding Allowance Certificate, as needed.

Employing agencies and universities making employee moving expense payments through local funds and foundations are responsible for correctly reporting and taxing these payments using their federal employer identification number.

If you have any questions or need additional information, please contact the Bureau of State Payrolls at 410-9416, Suncom 210-9416.