Under prior tax law, most payments by an employer to or on behalf of an employee to offset the costs of relocation were excluded from the employee’s taxable income, i.e., such payments were non-taxable.  The newly signed into law Tax Cuts and Jobs Act suspends this exclusion except as it applies to active members of the Armed Forces.

This means that employee relocation payments, as discussed in State of Arizona Accounting Manual (SAAM), Section 5535, Employee Relocations, will be taxable and subject to withholding.  None of the provisions of SAAM 5535 change. 

The existing HRIS pay code 672, employee relocation reimbursements—nontaxable, will soon be end-dated and a new HRIS pay code 673, employee relocation reimbursements—taxable, will be added.  All reimbursements made to employees on or after January 1, 2018, are taxable and are to be made using pay code 673 when it becomes available.  No relocation expenses or reimbursements are to be paid though AFIS.  Additional information will be forthcoming when available.

Comments, corrections, complaints and compliments should be emailed to [email protected].  Please include the number of the SAAM section and relevant paragraph(s) (SAAM NNNN-nn.nn.nn) in the subject line.