Below is an example of an email can send to your future employer during the negotiation period to ask for a relocation tax gross-up:. Thank you for sending over such a comprehensive overview of potential benefits along with your offer letter.
I am thrilled by the prospect of joining your company. After reviewing the compensation and benefit package details, I had a clarifying question regarding the relocation benefit. I greatly appreciate your generous offer to reimburse me for my moving expenses.
Unfortunately, I found that under the Tax Cut and Jobs Act, the amount you reimburse me would be considered taxable income, and therefore, I would be required to pay additional relocation tax costs. I was hoping we could meet and discuss the possibility of your company offering a tax gross-up to ensure I would not incur extra costs from the relocation benefit. When would be best for you to meet?
Best wishes, Justin O'Keefe jokeefe email. Find jobs. Company reviews. Find salaries. Upload your resume. Sign in. Starting a New Job. What are moving expenses? Why do employers pay for moving expenses?
How do employers pay for moving expenses? It is for the record of both the employee and the employer. In the case of the employer, these expenses to reimburse the relocation allowance will be claimed under business expenditure in its books of account.
The difference of the actual incurred amount and the paid amount shall be taxable. The employer plans accordingly for the re-location and the reimbursement on the basis of the tax-benefit, so as to claim these expenses as business expenditure.
Jagrity Sharma 26 September Features of Tax Exemption on Relocation Allowance Here are a few salient features of tax exemption on relocation allowance Tax Exemptions Packing and moving cost: All directly related expenses to the transfer are exempted, packing and moving costs is reimbursed for the fuel used in the vehicle, driver charges etc.
Taxable Under Salary Income School admission fees: Fees for school admissions are considered a monetary benefit of the employee, and reimbursement of the same is taxable under the Income Act as salary income. How to Make a Relocation Allowance Claim? Written by Jagrity Sharma. Types of Life Insurance Plans. Life Insurance Terminologies. Some employers compromise and gross-up only some relocation benefits. Employers that choose not to gross-up should be sure that employees are aware that taxes will be withheld from the payments they are expecting.
Companies that choose to gross-up need to determine the rate they wish to apply. The options include:. With the rate determined, the company then must determine a gross-up calculation method.
Gross-up payments themselves are taxable, so companies need to decide if they will gross-up the gross up. There are at least three different ways for companies to calculate a gross-up: flat method, inverse method and true-up method. Because this is an estimated amount, Erica might still have taxes due at tax time, but it will be a lower amount.
Therefore, these are expenses reimbursed by employer from earlier place of residence to the place of new employment would be exempt from tax. Accommodation provided in a hotel for the initial period of 15 days on joining the employment: Expenses reimbursed by the employer or paid by employer to the hotel for initial 15 days would also be exempt from tax for the employee.
These expenses would also include boarding and lodging expenses, including any meals forming part of such expenses. Note, any expenses incurred beyond 15 days would become taxable as salary income for the employee. You may also watch: How to claim relocation allowance Employee should maintain the documents, proof of payments, any other agreement signed with employer substantiating the claim and payment of expenses incurred on transfer.
These documents can be asked by the employer for their records. Also, the employer would need to claim these expenses in its books of account as business expenditure. If the employer pays more relocation allowance to the employee than the actual expenses incurred, then the difference would become taxable as salary income for the employee. Accordingly, the employer should plan the re-location of the employee and reimburse expenses basis the tax benefit, it can partake with employee and claim such expenses as business expenditure.
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