This exclusion applies to any amount you give an employee, directly or indirectly (including services furnished in kind), as a payment for, or a reimbursement of, moving expenses. You must make the reimbursements under rules similar to those described in chapter 13 of Publication 535 for reimbursements of expenses for travel, meals, and entertainment under accountable plans.

This exclusion applies only to reimbursements of moving expenses that the employee could deduct if he or she had paid or incurred them without reimbursement. However, it does not apply if the employee actually deducted the expenses in a previous year.

Deductible moving expenses include only the reasonable expenses of:

1. Moving household goods and personal effects from the former home to the new home, and
2. Traveling (including lodging) from the former home to the new home.

Deductible moving expenses do not include any expenses for meals.

For more information on deductible moving expenses, see Publication 521, Moving Expenses.

Employee. For this exclusion, treat the following individuals as employees.

1. A current employee.
2. A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.

Exception for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation. A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power.

Exclusion from wages. You can generally exclude qualifying moving expense reimbursements you provide to an employee from the employee's wages. If you paid the reimbursements directly to the employee, report their amount in box 12 of the Form W-2 with the code P. Do not report payments to a third party for the employee's moving expenses or the value of moving services you provide.

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