Does your employee relocation package include a lump sum for moving expenses? If so, it’s important to know how to get the most out of your lump sum package so that you, and your employer, have a positive relocation experience.
Employee Relocation Package and Taxes* Lump Sum payments to individuals for relocation expenses, including moving, are fully taxable as earnings. While some employees receive some tax assistance, or “grossed up,” lump sum packages in order to take home the full amount recommended for moving, others do not. Understandably, this creates a dilemma for transferees because there is often not enough money after taxes are deducted (about 40-45 percent) to pay for all of the things that the relocation package intended to cover.
Payments made directly by your employer for household goods moving services to the moving company, however, are excludable and do not need to be reported on your Form W-2 or IRS Form 3903. Therefore, if your company arranges a direct billing agreement with a provider for household goods moving, 30 days or less of storage, automobile transportation, etc. it will save both of you a taxation headache (in terms of timing and deductions). Direct billing arrangements also have other potential advantages, including replacement coverage for damaged or lost items at no cost to you, as well as moving priority.
If your company would prefer to avoid a direct billing arrangement for the whole employee relocation package, you can ask them to include just your moving expenses on an expense report which you will submit for reimbursement.This will prevent you from being taxed on these exempt items. You will still list your moving expenses on IRS Form 3903 and they will show up in Box 12P of your Form W-2, but they will not be considered income.In this case, your moving expenses are being paid outside of the lump sum, so your actual lump sum payment will be less, which is a benefit to you because it’s still being taxed as income. The remaining funds in your lump sum payment can be spent on other relocation items that your company intended to cover including a home finding trip, temporary living, and other relocation incidentals such as a new driver’s license, baby-sitters, cable setup, utilities and more.
If a direct billing agreement, or an expense agreement, is not arranged, you will be taxed on moving expenses upfront (as part of the 40-45 percent lump sum tax) and will have to wait until year end to claim your tax refund. You can claim the refund by filing IRS Form 3903 with your tax return to receive credit for taxes withheld in connection with the household goods moving portion of the lump sum payment.
Author:Edie Webber Phone: 817-798-6630 Dated: December 21st 2017 Views: 276 About Edie: My current state of happiness and realized dreams is the hard won result of a lifetime journey. I ha...
My current state of happiness and realized dreams is the hard won result of a lifetime journey. I have been involved with real estate my entire career and believe it the best investment most families will ever make. I have a wonderful family, 1 husband, 3 boys, 2 horses, 2 dogs, 10 to 12 cows on any given day, and a donkey that is trespassing. I live in Paradise Texas (yes it is) enjoy foxhunting, dressage, and the outdoor life.
Although I do enjoy an insane amount of joy, love, prosperity, health and happiness, this was not always the case. We all go thru things, all of us are or have been members of the “walking wounded".
My ignorant bliss came to a crashing halt shortly after I got married and then pregnant (yes in that order). Although married a wonderful loving man, a total lack of being prepared for adulthood threw us into instant financial turmoil that took everything we had. I was defeated before I really ever got in the game.
At the naive age of 22 I was totally hopeless. Homeless, broke, a huge growing belly to remind me daily that there was another dilemma coming.
So this is when God and I had a serious “come to Jesus" meeting. I had proudly struck out on my own and failed miserably. My anticipated launch into adulthood was a disaster. I knew I was beyond my resources and abilities. So I begged God to take care of me, my family, and my new baby as I had botched it badly. He heard me, or rather, I heard Him for the first time. I felt his promise that He would never leave me or forsake me. I was a child of the King.
So my launch was a disaster, but who says we can’t start over? And over, and over, if need be. I began my life as a real estate entrepreneur. Which led to bigger opportunities and more success over the years.
Fast forward to now: I enjoy a successful Real Estate career, own a nationwide credit repair business (shameless plug: www.640orFREE.com), invest in rehabbing homes (a necessary skill I had to learn early in life) and team with my husband Brian, Mortgage Loan Officer with Gold Financial. We enjoy working with each other and with our clients.
I live a life of gratefulness. Grateful for everything: the trees, sunshine, coffee, wine, hot water heaters…. Loving life begins with loving the beauty and people that surround us daily. When you can lay in your warm bed, with your covers up to your nose, grateful that you woke up, grateful for the snores of the man next to you, grateful for the creaking floorboards upstairs as your children move about, love the sunshine coming thru the window…. and it’s just a typical Monday morning… you have truly found happiness.
I whisper “Thank you Lord for the blessing in my life"