By Javier Martinez, Director of Payroll Management Services October 2008
Jan 28, 2016
By Javier Martinez,
Director of Payroll Management Services
October 2008
Relocation Reimbursement
Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting
Initial Test of DeductibilityTime Test
During 12 month period immediately following the move, employee must work full time for at least 39 weeks.
What if he does not stay 39 weeks? What do we do?
Answer: Nothing
Initial Test of Deductibility
Distance Test New workplace must be 50 miles further from employee’s former
residence.
Old Work
Home
New Work
10 miles 60 miles
Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting
Deductible Moving ExpensesOnly two types of deductible Relocation
ExpensesTransportation of Household goodsTraveling
Deductible Transportation of Household GoodsReasonable expenses incurred …
PackingMovingInsuringStoring In-Transit
○ 30 day limit○ From old residence and before delivery to new
residence
Employer can pay Moving Company directly
Deductible Relocation Travel ExpensesReasonable expenses incurred…
Transportation○ Flights○ Automobile (Self-drive)
Mileage: $0.27 per mile (Effective 07/01/2008)Actual Receipts
Lodging
Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting
Qualified Relocation Expense
Relocation expenses must pass both criteria…
Wages
“All remuneration for employment, including the cash value of all remunerations (including benefits) paid in any medium other than cash” IRC §3121(a)
Great News!
Qualified Relocation Expenses reimbursements are Non-Taxable Fringe Benefits
Amounts paid or reimbursed by the employer are a non-taxable fringe benefit to the extent the moving expenses qualify for a deduction and if the employee did not deduct them in a previous year. IRC §132(a)(6), §132(g)
Reasonable Expenses
“Reasonable” ExpensesWhat are reasonable expenses?
What does this mean?
Relocation expenses are deductible only to the extent they are reasonable under all circumstances related to the move. IRS Reg §1.217-2(b)(2)
Transportation Expenses Packing Moving In-transit storage Includes specialized
Movers○ Pianos○ Oversea Shippers
Traveling Expenses Transportation Lodging
Non-deductible Expenses (IRS Pub 521) Any part of the purchase price of the new home Car Registration (tags) Driver’s License Expenses of buying or selling a home Home improvements to help sell your home Loss on the sale of home Mortgage Penalties Pre-move house hunting expenses Real Estate Taxes Refitting of carpet and draperies Return trips to former residence Security Deposits Storage Charges (excluding In-Transit)
Relocation Expense Reimbursement Reporting
How does the IRS know?
Answer: We are required to tell them.
Relocation Expense Reimbursement Reporting to IRS Qualified Moving Expenses
Reimbursement:Form W-2: Box 12 Code P
○ i.e. P 1200.00
Non-Qualified Non-Deductible: Form W-2: Box 1 , 3, and 5
Relocation Reimbursement
UTSA Relocation Reimbursement Requirements Relocation Authorization Relocation Limit Reimbursement Criteria Relocation Reimbursement Payment
Procedure
UTSA Relocation Amount Authorization Vice-President Level Authorization
Required Vice-President may delegate
Delegation of Authority Memo
UTSA Relocation Amount Limit 10% of Computed Annualized Salary of
the prospective employee Not required to offer Relocation
Reimbursement, nor to the employee limit
Exception to 10% Limit: Approval by Vice President Business Affairs(or ) Approval by President
UTSA Relocation Reimbursement Criteria Qualified Transportation of Household
Goods Qualified Travel Qualified Lodging Meals* Pre-move House Hunting* Temporary Housing* Storage**Taxable Income to the employee
Relocation Payment Process Reimbursement Process: submit to Payroll
Offer Letter of Employment (must contain Relocation Amount)
Original ReceiptsLocal Funds Voucher
○ Employee’s Signature○ Account Signer Approval Authority○ Vice-President Approval Authority (one of the following)
On Offer Letter Email attached to Offer Letter Co-sign Local Voucher Delegation of Authority Memo on file with Payroll Office
Direct Pay to Moving Company via P.O.
UTSA Relocation Reimbursement Questions?