Taxes on Relocation reimbursement?

[Soon-to-be-NurseJess]

I've just relocated to the Ventura area of California and began working at an awesome hospital in the area. They offered great sign-on, relocation reimbursement, tuition reimbursement, the whole nine yards....but I just received my relocation reimbursement check...and they taxed it. Is this how its supposed to work when you get reimbursed for relocation expenses? No one ever pointed out that it would be taxed, and I'm a little confused as to why it's taxed? If anyone could enlighten me on this specifics of this, I'd be greatly appreciative.

[Altra, BSN, RN]

Any income paid to you, in cash or services, is taxable income regardless of the purpose.

Enjoy your new job & new home! :)

[catlady, BSN, RN]

Yes, indeedy it's taxable, and you should be grateful to your employer for taking the taxes out now. Many years ago I received a small relocation reimbursement (which didn't even begin to cover my actual moving expenses), didn't realize it was taxable, and didn't receive any notice or tax form from the hospital. Three years laterI get a notice from the IRS that I have to pay taxes, penalties and interest on the stipend, which just about wiped out the entire amount. The only saving grace was that they tried to charge me for SS and Medicare tax plus interest and penalties, and I argued that it was not earned income and thus not subject to SS/Medicare withholding, and they allowed me that small crumb.

However, these days moving expenses are deductible, and you should only have to take the reimbursement as an offset to your moving expenses. Whatever you spent above the reimbursement is a writeoff. If your expenses were less than your reimbursement, you'll owe money, but only on the difference.