Relocation Tax Update: COVID Tax-Free Disaster Relief Set to Expire 02.25.2022 | Marianne Schmidt

relocation tax

The world of relocation tax can be complex and overwhelming in the best of times; the pandemic has made it even more interesting. One of the few things that helped during the COVID-19 outbreak was the Stafford Disaster Relief and Emergency Assistance Act that allowed employers to consider qualifying pandemic-related expenses as tax-free payments.

Unfortunately, this Act is expiring on March 1, 2022.

On March 13, 2020, then-President Trump declared the COVID-19 pandemic a national emergency under the Stafford Disaster Relief and Emergency Assistance Act. This triggered the IRS to allow companies to offer their employees tax-free disaster relief payments under Section 139. While the declaration was set to expire in February of 2021, the program was extended through March 1, 2022.

Qualified disaster payments covered a number of unforeseen workforce mobility costs, including extended temporary living, emergency return trips and reimbursement of quarantine hotel stays. The benefits of allocating these expenses as disaster relief payments were significant:

  • The cost was not included as income to the employee
  • Prevents the need to gross-up the expense to cover the taxability
  • Payments were fully deductible by the organization
Over the course of the pandemic, Weichert tracked thousands of excludable disaster relief payments on behalf of close to 200 clients and helped them save nearly $3M in tax gross up!

This program was a true win-win, helping to keep employers and employees afloat in rough waters over the past two years. Going forward, the best way to control exception costs will be to ensure that your policy is adequate and that allowances will realistically cover today’s inflated actual costs. Further, you might consider rebranding your Miscellaneous Allowance as an “Exception Allowance,” fostering the notion that unexpected circumstances or exceptions should be covered by that allowance. This helps to address immediate needs in the most efficient manner while upholding your duty of care to your mobile workforce.

For more insight on how providing an adequate discretionary allowance (or Exception Allowance) can streamline your program administration and ensure a positive employee experience, go here.

COVID relief program details and tax credits are more fully described on the IRS website. As with any significant tax issue, always consult your corporate tax advisor for information on reporting and compliance requirements.

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Written by Marianne Schmidt

Marianne Schmidt

Marianne is our Vice President of US Domestic Tax Services and Reporting, overseeing everything from domestic tax implementation to year-end reporting for relocated employees, and managing all North American tax gross-up functions. She serves as a Trusted Advisor to clients, advising them on payroll processing and tax methodologies, and works to educate clients and senior management on domestic tax issues and strategy.

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