Last week, Marianne Schmidt, our VP of US Domestic Tax and Reporting, conducted an engaging webinar on ways companies can save cost by re-examining their tax gross-up processes. Attendees had a lot of questions, and while we didn’t have time to address them all during the Q&A segment of the webinar, we have, as promised, presented them here, along with Marianne’s responses, for your reading pleasure. Marianne remains happy to continue this dialogue with anyone interested; feel free to reach out to her directly or through your Weichert contact.
In what situation would a person only gross up deductible items for FICA only? If items are deductible wouldn’t they normally be non-reportable on the ER side?
Deductible moves and deductible expenses are two entirely different subjects. A deductible move is one that meets all the criteria (is closely related to the start of work, meets the distance test and meets the time test). HHG and final move expenses (except meals and mileage > IRS limit) are not reportable if paid to a third party and are only reportable (not taxable) if they are reimbursed to the employee. Deductible expenses are taxable expenses that have been paid to or on behalf of your employee and are the types of expenses that are deductible on schedule A of your 1040. Those deductible expenses should be grossed up for FICA only, otherwise your employees will experience a tax gross up windfall.
I thought the US payroll is pay-as-you-earn, therefore you need to issue the withholding payments and report the income when the transaction occurred to be compliant?
We do not withhold taxes from payments, we only provide gross up calculations to payroll. Once payroll assigns a check date, normally the taxes are due the next day.
What is the risk involved with moving to gross-up once per year?
Moving to an annual reporting schedule is the decision of your company, the risk would be whatever you make it or not. From my perspective, however, the risk is no different than other frequencies. Our clients have always been compliant and have never failed or been questioned under audit. Continue Reading →
A: While they’re not right for everyone, new hire graduates are one demographic for which the lump sum is very appropriate. According to the results of ERC’s New Hire Policies Survey, 46% of companies offer at least some entry-level new hires a lump sum to cover mobility expenses.
A lot of existing research doesn’t get into whether or not this amount should be grossed-up, but in my experience helping companies develop policies, the majority do provide tax assistance (in the form of a gross-up) on lump sums, even for those at the new hire grad level/tier. ERC’s survey data adds that when items are reimbursed, 70% of companies cover the gross-up for the additional federal and 64% cover the state tax liability caused by the move, supporting my findings. Continue Reading →
In households with pets, a beloved cat, dog or canary is considered a part of the family. But when it comes to relocation, companies can see things differently.
In my experience working with global corporations on policy development and benefits benchmarking, relocation coverage for pets is still considered progressive. Although nearly one-third of all companies offer some sort of pet relocation assistance, most companies consider this to be covered by the miscellaneous relocation allowance.
Typically, the decision comes down to a matter of company culture. But here are a few things you might want to specify if you decide to include pet relocation in your company’s policy:
— The employee is responsible for making all necessary arrangements (and understands the implications/costs)
— The employee must submit for reimbursement after the services have been provided
— Only the transportation of the pet is covered; the employee is responsible for such additional costs as shots, examinations and licenses.
— Which types of pets are covered (e.g. domesticated; household pets; or citing specific animals, such as cats, dogs, birds)
One other thing. Among companies that provide assistance, the vast majority implement a maximum amount; for example, $500 per pet, up to two pets or $750 maximum for any/all pets. This is considered a best practice and minimizes risk to the company for extensive costs associated with pets that would be considered “exotic,” such as snakes, goats, emus–don’t laugh; we’ve seen it all.
One of the most effective tools that companies are using to market properties is buyer incentives. Once reserved for homes that came into inventory, these incentives are now being employed earlier in the program to prevent homes from hitting inventory.
According to the results of our 2009 Mobility and the Current Real Estate Market survey, 43% of companies offer buyer incentives during the self-marketing period and the majority (69%) will determine the type of buyer incentive on a case-by-case basis. Buyer incentives come in different forms, including:
Provided the policy consistently indicates that the company will pay for identified buyer incentives (typically up to a maximum), those costs would be treated like all other closing costs paid by the employer. In a qualified homesale program that follows Worldwide ERC’s 11 Key Steps, these costs would not have to be reported as income to an employee and as a result not need to be grossed up.
Some companies have resisted formalizing incentives in their policies, instead preferring to offer them as an addendum to certain employees. But to avoid risks, best practice dictates that companies should formally include incentives in their policy. Sure, this can increase costs, but you have to weigh the cost of the incentive against the cost of delayed home sales and extensions for such things as temporary living and duplicate housing.