Moving Expenses - Payment Process & Tax Reporting :: Banking and Accounting Operations :: UW Financial Management
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Moving Expenses - Payment Process and Tax Reporting

Included on this page:

  • Introduction
  • Reimbursement
  • Expense Documentation for Reporting Purposes
  • Chargebacks
  • Internal Revenue Service Tax Issues
  • Qualified Moving Expenses as defined by the Internal Revenue Service
  • Non-Qualified Moving Expenses as defined by the Internal Revenue Service
  • Termination Procedures
  • Frequently Asked Questions
  • Contacts

    • Introduction

    Qualified new or transferred employee household move and associated travel expenses are governed by University of Washington and State of Washington policies and regulations. When it is necessary to successfully recruit or retain a qualified candidate, the administrative official with delegated authority may also authorized a lump sum relocation compensation.

    There are three departments that deal with the different issues of moving.

    1. Purchasing - Moving Your Household Goods
    2. Travel Office - In-Route Travel Expenses
    3. Banking and Accounting Operations - IRS Regulations and Reporting

    Reimbursement

    Whether your department choose to reimburse the employee after moving themselves or paying a State Contracted Move directly, a purchase order is required for reimbursement. If the University is paying the vendors directly, the full amount will be paid regardless of the dollar amount agreement with the employee. The employee will be asked to refund any differences after the vendors have been paid.

    Once Purchasing has reviewed the documentation for the employee's moving expenses, both reimbursement requests and payments to third parties are processed by the Payman team in Accounts Payable. Reimbursement for allowable travel expenses are processed on a Travel Expense Voucher (TEV) through the Travel Office.

    Expense Documentation for Reporting Purposes

    Each moving expense payment document is also recorded in a database under the employee's name. The database keeps a record of both payments to the employee and payments to third parties. The payments are reviewed and recorded according to the Internal Revenue Services definition of Qualified expenses and Non-qualified expenses. The database also reflects chargebacks requested by the State.

    The University accumulates data from November 1 through October 31. Moving expenses are recorded in the month paid not in the month the service occurred. Payments made in November and December are always reported at the end of the following year.

    Chargebacks

    A chargeback is a required repayment of a portion of the moving expenses for non-qualified expenses paid by the University to the new employee or to a third party on behalf of the new employee. Purchasing forwards the chargeback information to Banking and Accounting Operations for handling.

    Chargebacks will also be issued based on the maximum set by the department on its purchase order. It is the department's responsibility to inform the new employee of the departmental limits and state limits at the time of hire.

    Chargebacks are issued after the payments have already been made. If the employing department has chosen to cover the charges in excess of the State defined Qualified expenses, Banking and Accounting Operations writes a journal voucher to credit the original budget charged and debit the budget that will cover the excess charges. A copy of the journal voucher will be sent to the department for their file.

    If the department has chosen NOT to cover the excess charges, Banking and Accounting Operations issues a letter to the employee requesting a reimbursement to the University for those charges. A copy of the letter is also sent to the hiring department. The employee may choose to repay the University with a personal check or may choose the option of having the amount deducted through Payroll from up to four(4) paychecks. If the employee does not respond to the letter within thirty (30) days, a memo is sent to Payroll requesting deduction of the chargeback from the employees next paycheck. A copy of the memo to Payroll is also sent to the employee and the hiring department for their information.

    Internal Revenue Service Tax Issues

    Moving expenses which are allowable by State law are not necessarily considered Qualified and deductible by the Internal Revenue Service (IRS). The IRS requires the University to report moving expenses based on the information provided in their Publication 521.

    At the end of each year, a report for Payroll is extracted from the database of all payment activities that had occurred in the previous twelve months. This report provides totals of all Qualified payments to Employees, Non-Qualified payments to Employees and Non-Qualified payments to Third Parties.

    Qualified payments to employees and third parties will be reported in a box on the employee's W-2. The box is specifically used to inform the IRS of the amount of deductible moving expenses that were paid on behalf of the employee or reimbursed to the employee. If the employee wishes to itemize expenses on the 1040 Tax Return form, the employee would list the full deductible amount expended for the move and then deduct the amount that appears in the box. The difference is the amount the employee is allowed to deduct on the 1040 Tax Return.

    Non-Qualified payments to both the employee and third parties are reported as income to the employee. These expenses are added to the employee wages on either the first or second paycheck in December. These employees will notice a change in their year-to-date income and an increase in the amount of taxes deducted on that paycheck. Lump sum payments are also classified as non-qualified payments.

    Qualified Moving Expenses as defined by the Internal Revenue Service

    Below is a list of moving expenses recognized by the Internal Revenue Service as deductible expenses on the 1040. Please note: Only one one-way trip from previous residence is considered when calculating qualified expenses. If an additional trip is made to move family members the expenses will be calculated as non-qualified expenses.

    * NOTE: The State of Washington does not allow reimbursement of the shipping costs of a personal vehicle. The department may reimburse the equivalent mileage that would have incurred if the car had been driven. If the shipment cost was more than the mileage reimbursement and the department wishes to reimburse the difference, the difference must be paid on a discretionary budget (64-xxxx) as miscellaneous travel. If the mileage cost is more than the shipping cost, the department can choose to reimburse the lesser amount. The reimbursement must be submitted on a Travel Expense Voucher(TEV) and must have the shipment billing attached as backup. State very clearly on the TEV that the mileage is for the shipment of a personal vehicle. This will ensure the cost is reported as 100% Qualified. Without this information on the TEV, the employee will be subject to tax on the Non-Qualified amount of mileage.

    Non-Qualified Moving Expenses as defined by the Internal Revenue Service

    Below is a list of moving expenses which cannot be deducted as moving expenses according to the Internal Revenue Service. These expenses are considered a taxable benefit and will be included in the employee's taxable income for the year. These expenses are not considered as travel on University business.

    Termination Procedures

    Employees who receive assistance with their moving expenses are expected to remain employed with the University for a minimum of one year (nine months for nine month faculty). This requirement is stipulated in the Request for Moving Expenses (form A33) which is signed by the employee as part of the Employee Agreement. When signing this form the employee agrees to reimburse all previously paid moving costs to the University and further authorizes the University to withhold any sums due him/her as part or full repayment of such costs in conformance with RCW 43.03.

    If an employee terminates, the employing department should make every effort to recover the funds expended. The department should immediately notify Payroll to hold all payments of wages until an assessment can be made of what is owed the University. The department also needs to contact Banking and Accounting Operations to verify the amount to be collected. The reimbursement includes all expenses paid directly to the employee and those paid to third parties. Some funds may be recovered from the employee's wages but this may not be sufficient. The department may have to recover funds directly from the employee. If requests to the employee do not result in repayment, contact Invoice Receivables for assistance in billing and collections.

    If there is a special contract or settlement involved which would require reimbursement to a former employee or payment of third party expenses after termination, a memo outlining these special circumstances should be sent to the Banking and Accounting Operations. This will prevent any delays in payment or cancellations of checks issued to the former employee.

    Frequently Asked Questions

    Question: I moved last year. Why are the expenses being reported this year?

    Answer: (See Procedure)

    Question: Why wasn't I informed that I would have to pay for some of my move?

    Answer: (see Chargebacks)

    Question: Why do I have to pay taxes on the expenses that the IRS doesn't consider deductible?

    Answer: (see Non-Qualified Moving Expenses as defined by the Internal Revenue Service)

    Contacts

    Purchasing:
    purhon@u.washington.edu

    Banking and Accounting Operations:

    Catherine Sleipnes
    Accountant
    Moving Expense Desk
    sleipnes@u.washington.edu