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Relocation Expenses Reimbursement

By Javier Martinez, Director of Payroll Management Services October 2008. Relocation Expenses Reimbursement. Relocation Reimbursement. Relocation IRS Requirements. Initial Tests of Deductibility Deductible Moving Expenses Reporting. Initial Test of Deductibility. Time Test

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Relocation Expenses Reimbursement

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  1. By Javier Martinez, Director of Payroll Management Services October 2008 Relocation Expenses Reimbursement

  2. Relocation Reimbursement

  3. Relocation IRS Requirements • Initial Tests of Deductibility • Deductible Moving Expenses • Reporting

  4. Initial Test of Deductibility Time 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

  5. Initial Test of Deductibility Old Work New Work 10 miles 60 miles Home Distance Test • New workplace must be 50 miles further from employee’s former residence.

  6. Relocation IRS Requirements • Initial Tests of Deductibility • Deductible Moving Expenses • Reporting

  7. Deductible Moving Expenses Only two types of deductible Relocation Expenses • Transportation of Household goods • Traveling

  8. Deductible Transportation of Household Goods Reasonable expenses incurred … • Packing • Moving • Insuring • Storing In-Transit • 30 day limit • From old residence and before delivery to new residence • Employer can pay Moving Company directly

  9. Deductible Relocation Travel Expenses Reasonable expenses incurred… • Transportation • Flights • Automobile (Self-drive) • Mileage: $0.27 per mile (Effective 07/01/2008) • Actual Receipts • Lodging

  10. Relocation IRS Requirements • Initial Tests of Deductibility • Deductible Moving Expenses • Reporting

  11. Qualified Relocation Expense Relocation expenses must pass both criteria…

  12. Wages “All remuneration for employment, including the cash value of all remunerations (including benefits) paid in any medium other than cash” IRC §3121(a)

  13. 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)

  14. Reasonable Expenses

  15. “Reasonable” Expenses • 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 What are reasonable expenses? What does this mean?

  16. 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)

  17. Relocation Expense Reimbursement Reporting • How does the IRS know? • Answer: We are required to tell them.

  18. 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

  19. Relocation Reimbursement

  20. UTSA Relocation Reimbursement Requirements • Relocation Authorization • Relocation Limit • Reimbursement Criteria • Relocation Reimbursement Payment Procedure

  21. UTSA Relocation Amount Authorization • Vice-President Level Authorization Required • Vice-President may delegate • Delegation of Authority Memo

  22. 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

  23. 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

  24. Relocation Payment Process • Reimbursement Process: submit to Payroll • Offer Letter of Employment (must contain Relocation Amount) • Original Receipts • Local 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.

  25. UTSA Relocation Reimbursement • Questions?

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