Rev. Rul. 59-236

Advice has been requested relative to the treatment, for Federal employment tax purposes and for purposes of the withholding of income tax, of amounts paid by an employer to or on behalf of a newly hired employee for the expenses incurred by such employee in moving himself, his family and household goods under the circumstances set forth below.

The M manufacturing corporation with headquarters in the State of New York, hired a new employee living with his family in California. In accordance with its usual practice, the corporation agreed to pay a fixed-rate mileage allowance to its new employee to cover the cost of travel by automobile from the employee's former residence to the headquarters city of the corporation. If the employee preferred to travel with his family by air, the corporation would reimburse him for the cost of the air travel. The employee could have his household goods moved at his own expense and then seek reimbursement or he could have the move made by one of certain specified moving companies located in the headquarters city of the corporation, whereupon the corporation would pay the cost of such move directly to the moving company.

Section 3401(a) of the Internal Revenue Code of 1954, relating to the Collection of Income Tax at Source on Wages (chapter 24, subtitle C, Internal Revenue Code of 1954), defines the term `wages,' with exceptions not here material, as all remuneration for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash.

Revenue Ruling 55-140, C.B. 1955-1, 317, holds that expenses incurred by an employee in moving his family and household goods from one locality to another where he had accepted a new employment with another employer are nondeductible expenses and that allowance or reimbursementas received from the new employer for such expenses must be included in gross income.

In United States v. Sherrill O. Woodall, et al. , 255 Fed.(2d) 370, certiorari denied, 358 U.S. 824, the court held, in effect, that amounts received by two employees as reimbursement for the costs of moving themselves and their families from Texas and Kentucky to their place of new employment in New Mexico, were compensation for personal services and therefore includible in gross income.

Revenue Ruling 54-429, C.B. 1954-2, 53, insofar as material here, concludes that there is no essential difference between the payment of a moving cost directly by the employer and the payment of such cost by the employee with subsequent reimbursement by the employer.

In the light of the above authorities, it is held that the amounts paid by the M manufacturing corporation to or on behalf of its newly hired employee under the above circumstances (whether by way of allowance, reimbursement, or directly to a moving company) for the expenses incurred by the employee in moving himself, his family and household goods to the headquarters city of the corporation, constitute `wages' for purposes of the Collection of Income Tax at Source on Wages. Such amounts should be included in the `wages' reported on Form W-2, Withholding Tax Statement.

Similarly, such amounts constitute `wages' for purposes of the taxes under the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (chapters 21 and 23, respectively, subtitle C, Internal Revenue Code of 1954).

Rev. Rul. 55-140, C.B. 1955-1, 317, amplified.