If you receive a payment from your employer for your moving expenses, that payment may be reimbursement for specific expenses, such as your moving company bill, your airfares, or other expenses. Or it may be an advance or an allowance for a certain amount of money. How you treat that payment on your tax return will depend on whether you are expected to provide receipts and account to your employer for the moving expenses. And it will also depend on whether your employer is reimbursing you for expenses that would be deductible as moving expenses or for expenses that would not be deductible, or a combination of both. The IRS instructions and publications refer to "accountable plans" and "nonaccountable plans."
If you present receipts and account for the expenses that are being reimbursed, your employer should not include that amount in your compensation, in box 1 of your W-2. Instead, your employer should report the reimbursement in box 12 code P on your W-2. This is the amount you should report on line 4 of Form 3903 – Moving Expenses. If the reimbursement is more than your actual deductible expenses, the excess is taxable compensation to you. On the contrary, if the reimbursement is less than your actual deductible expenses, you can take the difference as a deduction.
If your employer reimburses you for the exact amount of your deductible moving expenses and reports this amount in box 12, code P on your W-2, you do not have to include the amount in income and do not need to file Form 3903.
If your employer reimburses you for expenses that would not be deductible as moving expenses, such as reimbursement for the loss on the sale of your home, this payment should be included in box 1 of your W-2 and is taxable compensation to you.
If your employer reimburses you for both deductible and nondeductible expenses, your employer should determine how much must be reported in box 1 of your W-2 as taxable compensation and how much should be reported in box 12, code P as deductible moving expenses.
If you are not reimbursed, you can deduct your allowable moving expenses the year you paid them, or the year you incurred them.