This Q&A has been developed to provide general information for churches and clergy who may have questions about the change in federal tax law concerning moving expense payments.
Q: How does the new law change moving expense payments?
A: The moving expense exclusion and the individual deduction were both eliminated for tax years 2018 through 2025. This means that any moving expense payments you receive will be subject to income taxes and SECA.
Q: What if I don’t receive payment directly? Am I taxed if my church arranges for the move (e.g., by paying the moving company directly on my behalf)?
A: Yes. The tax code defines income as coming from any source and affirmatively defines amounts received for moving expenses as part of gross income, if attributable to employment or self-employment. Regulations clarify that your income is increased in the amount of the value of moving services, even if you do not receive any money yourself, as in the case where your employer arranges the move.
Q: How will the moving expense payments be reported to the IRS?
A: Moving expense payments paid directly to you or to a moving company should be reported in box 1 of your W-2, along with your other compensation.
Q: In what tax year will the moving expense payment be taxable to me?
A: It will be taxable in the tax year that you receive the payment. For example, if you receive a moving expense payment on January 5, 2020, it is taxable to you in the year 2020, even if your move occurred in 2019. If the moving expense payment is paid directly to a moving company, the amount will be taxable to you in the year the payment is made to the moving company.
Q: Should I withhold extra from my paychecks to cover the taxes on moving expense payments?
A: You may wish to withhold extra, or make additional quarterly payments, to cover the additional income taxes that will be due on the moving expense payment. Generally, the church will not withhold anything from the payment to cover income taxes. Also, remember that moving expenses are subject to SECA taxes.
Q: What is the tax impact to me if my church fails to report these payments on my W-2?
A: You are required to file accurate tax returns. If your church does not report the moving allowance on your W-2, you must report this income as other income on line 8 schedule 1 1040.
Clergy Financial Resources offers several options to help you with your tax questions or filing. Here are two options available.
- Pro Advisor I Tax Support
This support service provides you comprehensive answers to your notice questions. This support service is available at a flat rate of $45.00 for each 30-minutes session.
- Learn More About Tax Services Designed for Clergy
As a specialist within our industry, our annual tax service is uniquely designed and bundled with three valuable services; Clergy Support which provides answers to your questions throughout the year; tax preparation to ensure compliance while minimizing your tax liability; Estimated Payment Support to prevent those unwanted surprises.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
For more information or if you need additional assistance, please use the contact information below.
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