Tax Type
Employer Income Tax Withholding
Description
Moving expense reimbursement
Topic
Withholding of Tax
Date Issued
09-06-1988
September 6, 1988
Re: Ruling Request
Income Tax Withholding
Dear******************
This is in reply to your letter of July 18, 1988 in which you inquire about the Virginia income tax withholding requirements, as they relate to moving expenses.
Federal Law
Prior to the federal Tax Reform Act of 1986, the reimbursement for moving expenses and the allowable moving expense deduction were both components of federal adjusted gross income. The employer was not required to withhold on the reimbursement if he reasonably believed that the individual would be allowed to deduct the moving expense as an adjustment to income. Effective for taxable years beginning on and after January 1, 1987, while the reimbursement for moving expenses is still a component of federal adjusted gross income, the moving expense deduction is now an itemized deduction. The employer is not required to withhold on the reimbursement if he reasonably believed that the individual will be allowed to deduct the moving expense.
Ruling
Virginia has followed the federal requirements as they relate to the withholding on reimbursements for moving expenses. Previously when the reimbursement for moving expenses and the allowable moving expense deduction were both components of federal adjusted gross income, the department ruled that if there was no federal withholding, there would be no Virginia withholding required.
As a conformity state, Virginia itemized deductions include all allowable federal itemized deductions, with the exception of the federal itemized deduction for state and local income taxes. Therefore, an amount deductible as a federal itemized deduction for moving expenses is an allowable Virginia itemized deduction.
Consequently, Virginia will continue to follow the federal requirements as they relate to the withholding on reimbursements for moving expenses. No Virginia withholding will be required on allowances or reimbursements for moving expenses if an employer reasonably believes that the individual will be able to deduct the expense and no federal income tax is withheld on the reimbursement. To the extent that the amount of allowance or reimbursement for moving expenses must be separately stated on Form W-2 for federal purposes, it must be separately stated on Form W-2 for Virginia purposes.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner