The Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) significantly changed employer requirements with respect to employee moving expense reimbursements. This regulation applies to all benefit-eligible, permanent employees relocating to the University to accept a position. This procedure does not apply to visiting academic personnel who have appointments of one year or less; such visitors are considered to be in traveling status and reimbursements for living and travel expenses should continue to be processed via Travel Expense Vouchers.

Effective January 1, 1998, the IRS instituted the following reporting changes.

• The University is not required to report on an employee’s IRS form W-2 moving expense payments that were made directly to a third party on behalf of the employee for example, a moving van line.
• In addition, the requirement to file an IRS form 4782 "Employee Moving Expense Information" with the IRS and employee has been eliminated.

Reimbursements for the following moving expenses are fully taxable, and cannot be deducted on the employee’s tax return.

• Pre-move house hunting expenses.
• Temporary living expenses.
• Meal Expenses.
• Qualified residence sale, purchase, and lease expenses.

Reimbursements for the above expenses must be reported as gross income on the employee’s Form W-2, and all appropriate taxes are withheld at the time the payment is issued.

Reimbursements for the following expenses are nontaxable, provided that the move meets the IRS Distance Test (see discussion on next page):

• Van Line charges to move household goods and personal effects from the old location to the new location.
• Lodging expenses for the final trip to the new location.
• Transportation expenses for the final trip to the new location.

Reimbursements for these expenses will be reported on the employee’s Form W-2 (Box 13) as a nontaxable fringe benefit. These expenses are excludable from an employee’s gross income and are not subject to tax withholding.

When requesting reimbursement of moving expenses Administrators must use the Moving Expense Reimbursement Form when reimbursing either an employee or third party (see discussion on next page). Departments must request forms in advance directly from the Payroll Department.

Instructions for Completing the Moving Expense Reimbursement Form

University administrators must use the Moving Expense Reimbursement Form (see attached copy) when requesting reimbursement. This procedure applies to all benefit-eligible, permanent employees who have relocated to the University to accept a position; reimbursements for living and travel expenses of visiting academic personnel (appointments of one year or less) must be processed on Travel Expense Vouchers.

The Moving Expense Reimbursement Form is used to reimburse employees (through the Payroll System) and third parties (through the Non-Salary Disbursements System). Departments should not use the Direct Payment or Travel Expense Vouchers for the payment of moving expenses. The Moving Expense Reimbursement Form contains the following sections:

SECTION A: DISTANCE TEST

Employees must first pass the ‘Distance Test’ in order for any portion of their moving expenses to be considered nontaxable income: The individual’s new main job location must be at least 50 miles farther from the individual’s former residence than the former residence was from the old place of work.

Example: Joe Smith’s home in Suburb A is 10 miles from his office in the city. In 1998, he begins working for the University. Joe’s moving expenses are deductible only if his new job at the University is at least 60 miles away from his former residence in Suburb A. If the employee does not pass the Distance Test, all moving expenses (Items 1 through 4) will be treated as taxable compensation, subject to payroll tax withholding.

Note: The Federal Standard Mileage Rate is now 32.5 cents a mile. Only 10 cents of this rate is considered to be nontaxable, the difference (22.5 cents a mile) is considered taxable moving expense reimbursement.

SECTION B: USE THIS SECTION TO REIMBURSE THE EMPLOYEE DIRECTLY

List all moving expenses that are to be reimbursed directly to employee. These payments will be processed through the Payroll System.

Nontaxable expenses, provided the employee passes the Distance Test, include the following:

(1) Transportation and Storage of household goods and (2) Travel/Lodging. Reimbursements for these expenses are excluded from gross income and are not subject to tax withholding. The total nontaxable amount, however, will be reported on Form W-2 as a nontaxable fringe benefit in Box 13 (Code "P").

Taxable Expenses include all of the following: (3) Pre-move house hunting expenses, (4) Temporary living expenses, (5) All other expense (including meals). Reimbursements for these expenses are included in gross income and are subject to payroll tax withholding (Federal, State and applicable FICA)

"Charge To" Section: Provide a FAS account number(s) along with an Authorized Signature. Note that original receipts must be attached to this form.

SECTION C: USE THIS SECTION FOR THIRD PARTY PAYMENTS

(Complete a moving Expense Reimbursement Form (Side 2) for each third party payee)

"Issue Check to" Section: Provide the complete name and address of the third party payee.

List all moving expenses that are to be reimbursed to the third party. These payments will be processed through the Non-Salary Disbursements System. If the employee’s move passes the Distance Test, Items 1 and 2 are not subject to tax withholding, and will not be reported on Form W-2 beginning with calendar year 1998.

Reimbursement for the remaining items (3 through 5) is taxable to the employee and must be included in the employee’s gross income. Since the payment is being made directly to a third party, the appropriate taxes (Federal, State and FICA) will be withheld from the employee’s next payroll check.

"Charge To" Section: Provide a FAS account number(s) along with an Authorized Signature. Original third party invoices must be attached to the form. Please note that all Departmental payments made payable to the University Real Estate Operations for the temporary housing of new employee’s must also be reported to the IRS. In these situations the department must attach a copy of the Interdepartmental Order (Form 62).

To obtain the Moving Expense Reimbursement Form, please contact the Payroll Department at 702-0306.

If you have any questions regarding this memo, please feel free to contact me at 702-1945.