The cost of moving

Nation's Business, Oct, 1988 by Gerald W. Padwe

The Cost Of Moving Moving employees from one place to another is tough on the family and tough on bank accounts. Tax laws help--to a point. Many expenses associated with a move are deductible by the moving employee, so the employer does not have to "gross up" reimbursement of those expenses to make the employee whole after taxes.

Numerous rules and restrictions apply, though, before a moving expense is deductible. Not the least of these is that, following the move, the taxpayer must remain a full-time employee, in the general location of the move, for 39 weeks of the next 12 months.

What happens, then, when an employer moves an employee from New York to San Francisco, but four months later determines that the employee is needed in Dallas to head a new division? Even though the employee did not remain in San Francisco for 39 weeks of the 12-month period following his relocation, both sets of moving expenses are deductible, since the second move was "for the benefit of the employer," and a special exception to the 39-week rule covers such circumstances.

But be careful. In a recent ruling, the IRS considered an employee who moved to a new location on January 2 to take a position with the federal government. In April, the employee applied for a vacancy in another city, resulting in a promotion. The government reimbursed the employee's moving expenses, under a provision of the law that authorizes such reimbursement when a transfer is in the best interests of the government and not primarily for the convenience or benefit of the employee.

Still, says the IRS, the employee in this situation is not entitled to a tax deduction for the expenses of the first move, in January, because the "benefit of the employer" exception to the 39-week rule does not apply. "Benefit of the employer" means beyond the control of the employee; and since the employee initiated the request for transfer, it was not beyond the employee's control.