Prior to the Tax Cuts and Jobs Act of 2017, some relocation benefits were not considered taxable income for employees. Employers could also deduct relocation expenses sustained when relocating their employees. As a result of this legislation, employees now have to pay tax on most benefits they receive and employers can no longer classify relocation expenses as tax deductible.

Relocation expenses, both reimbursed to an individual or paid to a vendor on behalf of an individual, are taxable income to the individual. Beyond cash payments and bonus incentives, the cost of flights and moving fees paid by a company whether temporary or permanent are all taxable. At the organization’s discretion, taxes owed by the employee on third-party payments may be reimbursed.

Reimbursement of taxes owed is also known as “gross-up”. Gross-up is additional money an employer pays an employee to offset additional income taxes the employee would owe the IRS when that employee receives company-provided benefits, such as relocation expenses.

One of the most challenging aspects of an employee relocation is year-end preparation and tax gross-up. The process of preparing to facilitate efficient tax filing and reconciling all of the data that has accumulated over the past year on the part of the transferee can be a very daunting task.

Here are some things to consider when preparing for year-end and tax gross-up:

• Identify employees that received relocation services
• Indicate due dates, being mindful of where a fiscal year-end reporting schedule applies
• Account for all compensation data including income, incentives, flights, moving expenses, etc.
• Double check addresses, social security numbers, wages, benefits, vacation, and sick time
• Include final payroll reports of the year, inclusive of year-end incentives and bonuses
• Send data ahead of time when possible due to locations with quick turnaround times to make final tax payment of the year

Best wishes in hoping you have a successful year end!

 

About: Signature Relocation has been a full-service relocation provider since 1998. We offer a complete range of domestic U.S. and global relocation services. Signature Relocation provides custom-based support in program administration and single-point-of-contact management of home sales, destination services, household goods move management, and international assignment support.

To learn more information about relocation tax preparation & gross-up or the quality services we offer you can visit us at www.signaturerelo.com, or contact us by phone (877-373-0691) or email (info@signaturerelo.com) for more information.

Signature Relocation has strategically assembled its team to lead and assist a recently signed International Agriculture Company, with global initiatives relocating employees throughout North America, Africa, and South Asia. Signature Relocation was selected for its unlimited ability to improve the quality and experience of employee relocation, also reducing costs, time, and stress for their Human Resource Professionals.

With over 20 years in the industry, Signature Relocation has extensive experience in the management of global household goods (HHG) and will apply this collection of quality through a single point of coordination; assisting relocating employees with destination services, immigration, temporary housing, rental assistance, U.S. Domestic HHG, Global HHG management, and tax gross-up when applicable.

Signature Relocation takes pride in building relationships, thoroughly understanding the needs of our global mobility clients to manage all aspects of employee relocation, helping employees feel confident about the relocation process, and paving the way for a faster more seamless move.

To learn more about how Signature Relocation can provide your organization with the best-in-class employee experience combined with the highest quality in the industry visit us at www.signaturerelo.com or contact us by phone (877-373-0691) or email (info@signaturerelo.com) for more information.

 

“Quality is not an act; it is a habit.” – Aristotle

At Signature Relocation, we are passionately committed to the relentless pursuit of global service excellence, particularly when it comes to buying or selling your home. Today we can reference IRS Revenue Ruling 2005-74, this ruling addresses the income tax treatment of costs an employer incurs in connection with the different home purchase programs the employer may offer to relocating employees.

The most common type of tax-protected home sale program is the Buyer Value Option or BVO. BVO is a process in which an employer can pay for a transferring employee’s home selling costs and avoid the income tax implications to the employee and to the company. The home sale program creates two separate sale transactions: one where the transferring employee sells their home to a relocation management company (RMC), such as Signature Relocation, and the other where the RMC sells the home to the outside buyer.

How Does it Work?

• Step One – The transferring employee, with assistance from Signature Relocation, markets their home for sale.
• Step Two – When an outside buyer comes along and makes an offer, Signature Relocation steps in and buys the home from the transferring employee.
• Step Three – Signature Relocation then turns around and sells the home to the buyer, and pays the realtor commissions and closing costs. These costs can then be treated as business expenses by the company.
• Step Four – Signature Relocation bills the employer for the realtor commissions and closing costs that Signature Relocation paid as the seller. Since the transferring employee never paid any real estate commissions or closing costs, the transferring employee incurs no income tax burden.

It is important to note that there must be two separate transactions. If the deal were to fall through after the relocation company buys the house from the transferring employee, there are no do overs; when structured properly, the BVO sale process can be a win-win for all.

For more information about how much you can save with Buyer Value Option (BVO) or other relocation needs, please visit our website at www.signaturerelo.com or call us at (877-373-0691) ) or email (info@signaturerelo.com) for more information.