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Category: Relocation Policy

U.S. IRS Reiterates Position Limiting Deduction of Pre-Paid 2018 Property Taxes

| July 30, 2018

2018 Property TaxesThe following article was originally published by Pete Scott on https://www.worldwideerc.org.

In a letter to the Attorney General of New Jersey released 29 June 2018, the U.S. Internal Revenue Service (IRS) restated and supported the position it took in December of 2017 that prepayments of 2018 property taxes in 2017 are allowable as 2017 deductions only if the 2018 tax has been assessed.

The latest IRS letter makes clear that it is not backing away from its earlier position. The correct answer will eventually have to be decided by the courts. 

Following enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), which imposed an aggregate deduction limit of $10,000 on state and local income, property, and sales taxes beginning in 2018, many taxpayers sought to prepay 2018 taxes in 2017 hoping to achieve a full deduction on their 2017 returns. The TCJA explicitly forbade such deductions for 2018 income taxes, but was silent as to property taxes. Read More

What is a Short Term Developmental Assignment?

| June 26, 2018

STDAShort Term Developmental Assignments (STDAs) are an increasingly popular tool for businesses to accomplish specific, finite projects and to develop employees while containing costs. Domestic STDAs really seemed to take off in the U.S. in the aftermath of the Great Recession. Concurrently, international short-term assignments, which have been on the radar longer, grew in popularity as companies looked for ways to reduce the cost of international relocation. Read More

How are Companies Now Treating Employee Moving Expenses for Tax Purposes?

| April 27, 2018

Employee Moving ExpensesThe passage of the Tax Cuts and Jobs Act in late 2017 and its almost immediate effective date of 1 January 2018 took many in the mobility industry by surprise. One key change, the repeal of the employee moving expenses deduction, left many companies wondering about the tax treatment of three common relocation benefits that historically have been tax deductible for transferees:

• Household Goods Shipment (including pet and automobile shipments)
• Household Goods Storage Expenses
• Final Move Expenses Read More

International Relocation Assignments and the Tax Cuts and Jobs Act of 2017

| March 22, 2018

International tax job cuts - scissors with hands and rescue floatThe passage of the Tax Cuts and Jobs Act of 2017 has had far-reaching effects within the domestic sector of the global mobility industry, however, international employee relocations have been impacted as well.  All of the benefits that are affected from a domestic perspective will have the same implications on international moves if those benefits are included in an international relocation package. For example, household goods shipments and final move benefits are typically included in both international and domestic employee mobility packages.  As of 1 January 2018, both of these benefits have been deemed as taxable, with no distinction between the benefits being administered domestically or internationally.  It will be up to companies on an individual basis to determine if they are going to consider grossing up the taxes for both of these benefits going forward. Read More

Relocation Benefits Tax Changes: Key Issues to be Aware of When Completing 2017 Federal Taxes

| March 1, 2018

Relocation Benefits Tax ChangesWith the passage of the Tax Cuts and Jobs Act of 2017, there are key changes to the tax treatment of several common relocation benefits. Whether you are an employee moving domestically or globally or an employer who relocates employees, it is important to be aware of these changes as we head into tax season.

We outline these changes below and offer TRC’s recommendations on how to treat these benefits going forward. Read More

Lump Sum Policy Best Practices: Pros & Cons of Supplemental Lump Sums

| January 14, 2018

supplemental lump sumsAs the name suggests, companies offer supplemental lump sums to cover part of an employee’s relocation costs, not all of them. About one-third of TRC’s clients utilize the supplemental lump sum to cover benefits such as the home finding trip, temporary living and the final move. Companies usually tailor supplemental lump sums to each employee’s move, often by pricing accommodations through preferred providers and including pre-determined amounts for mileage and meals.

According to the Atlas World Group 2017 Corporate Relocation Survey, 50% of companies are using a supplemental lump sum to cover temporary accommodation costs, up from 38% – 43% in years 2011 through 2014. In its 2017 Workforce Mobility Benchmark Report, Runzheimer noted that nearly 50% of the organizations they surveyed manage home finding expenses via a supplemental lump sum. Read More

Lump Sum Policy Best Practices: Pros & Cons of a Core/Flex Program

| December 27, 2017

lump sum policyWhen discussing lump sum policy, the core/flex policy is an attempt to provide greater flexibility and a better employee relocation experience for the employee while allowing the employer to meet global mobility objectives and contain costs. A perennial complaint of transferring employees is that relocation policies include benefits the employee neither wants nor needs, but do not include alternative benefits that better meet the employees’ needs.

These benefits go unused, which saves the employer money but can leave the employees feeling like their needs have gone unmet. Occasionally, relocating employees ask to trade undesired benefits for ones that are more relevant (e.g. an extension of temporary housing instead of spouse counseling). Most employers view these request as exceptions to policy and deny them.

With a core/flex program, companies often choose to retain a tiered methodology, with tiers typically differentiated by job grade or homeowner/renter status. There is also a trend to have a dedicated “executive” tier for higher-level employees. Within each policy tier, there are specifically defined (core) benefits. Companies determine which core benefits to include by analyzing historical benefits usage data. The core benefits do not have a monetary cap or limit, but employees must use them exactly as defined in the policy. Read More

Managed Lump Sum Program: Pros and Cons to Consider

| December 22, 2017

managed lump sumA managed lump sum policy is similar to a traditional fixed lump sum except the company specifically defines the benefits covered by the lump sum in its policy guidelines. These benefits are sometimes presented as menu items, allowing the employee to choose benefits that best suit his or her needs. Other companies calculate the lump sum based on the benefits they intend to provide. Either way, the company typically provides relocation counseling (either in house or through a third-party provider) to help the employee use the funds most effectively. Unlike the traditional fixed, any unused funds revert back to the company. The company calculates the managed lump sum amount using the same methods as the traditional fixed, sometimes with the assistance of a third-party data provider.

Pros of a Managed Lump Sum Program

This model allows companies to track benefit usage and spend much more reliably than the traditional fixed. This closer control will also help the company to manage costs better with a vetted network of relocation service partners to ensure optimum pricing and quality. From a tax perspective, the employer can make direct vendor payments, allowing it to treat each of the components individually as taxable or non-taxable.  Read More

Lump Sum Policy Best Practices: Pros & Cons of a Traditional Fixed Lump Sum Program

| December 15, 2017

Hands exchanging a fixed lump sumA traditional fixed lump sum policy approach provides the relocating employee with a flat amount of money that he or she can use to pay relocation expenses. Under this program, the employee is usually responsible for coordinating the move details and allocating the available funds. Companies can use several criteria to determine the amount of the lump sum, including: 1) Job or grade level of the employee; 2) Homeowner versus renter status; 3) New hire versus current employee; 4) Historical averages for similar types of moves; 5) Distance of the relocation and family size; and 6) Discretion of the employee’s manager.

Companies can also engage a third-party data provider to determine the amount of the lump sum. The provider will consider current costs, distance, family size and any other parameters set by the employer in calculating a lump sum amount.

Read More

Proposed 2017 Tax Reform and the Substantial Effects it Could Have on Talent Mobility

| November 17, 2017

tax reformOn November 2, 2017, the U.S. House of Representatives Ways and Means Committee released new tax reform legislation entitled the “Tax Cuts and Jobs Act.”  Although currently in review and not yet passed into law, there are portions of the proposed tax law that would bring about a significant shock to the global mobility industry.  Because of the impact that this bill as it stands would have on our industry, it is imperative to understand what the current proposals entail and what the consequences would be as we move forward into 2018.

Elimination of the Household Goods Moving Expense and Final Move Non-Meal Expense Deduction

The household goods move for the employee is currently seen as excludable or non-taxable.  Under the proposed bill, all of these costs will become taxable in 2018 and corporations will need to determine if they are willing to cover the cost of the taxes (or gross-up) on behalf of their transferring employees.   As the household goods move is typically one of the most expensive relocation benefits offered (second only to the sale of the home), the financial ramifications for both the employer and the employee are considerable.  For example, if a household goods shipment costs $20,000.00 and the estimated gross-up to cover the taxes on the shipment would be $13,000.00, the employer would face an additional $13,000.00 in relocation fees, and the employee would see $33,000.00 of additional taxable income in their W-2—just for the household goods shipment alone. Read More

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