Time and distance tests

Moving expenses incurred by a transferee, within 12 months of starting work in the new location, may be qualified moving expenses. The transferee would need to pass both the time and distance tests as set forth by the IRS.

Time Test

To meet the time test a transferee must work full-time at least 39 weeks during the first 12 months after arriving in the new work location.

Distance Test

The transferee’s move may qualify for special tax treatment if it meets the distance test. The distance test is based on the location of the transferee’s former home, the location of his/her old place of work, and the location of his/her new place of work. The transferee’s new place of work must be at least 50 miles further from his/her old residence than his/her old place of work was from his/her old residence. For instance if a transferee’s old commute was 10 miles from home to work.  His/her new place of work must be located at least 60 miles (10 + 50) from his old residence.  The location of the new home does not factor into the equation.

One last item to remember is home purchase programs do not have to meet the 50-mile or one-year rules.  Distance, time and one-year rules are limited to moving expenses. It does not matter if the purchase of a home from the transferee occurs beyond the 12 month window or if the move does not meet the 50-mile rule.  As long as there is a company business purpose for the purchase, and it meets standards for home purchase programs such as those established in the “eleven key elements of an amended value program” homesale costs will not be taxable to the transferee.

For more on this topic, see 50-mile/one-year rules and home purchase programs  in the Worldwide ERC® Tax & Legal Master Source.

Low appraisal, What to do?

A low appraisal value can torpedo any home sale transaction. Both buyer and transferee have already agreed on a price and the buyer is busy choosing colors when suddenly the lenders appraised value comes in much lower than the sales price.

This scenario has played itself out countless of times in many home sale transactions but who really is to blame and what can you do about it?

Google maps update

A recent update to Google Maps is putting an end to the inconvenient process of searching and re-searching for directions online.

In the past this scenario would play out frequently.  Your transferee is researching directions/destinations for his/her home finding trip.  They need to walk away from their computer for a time and when it comes time to actually heading out; the directions that were previously searched are gone.  What this means is having to search again for the places/directions and then remember which route was the preferred one.

Google is taking care of this behavior with its update.

Tax gross up 101

What is tax gross up?  A tax gross up means the company has increased an employee’s pay, bonus, or any other taxable income so the employee doesn’t actually pay his/her own (estimated) tax. If they are told they are getting a million dollar bonus, the tax gross up means they actually get a check for $1 million after taxes.  As most relocation costs are considered income to the transferee and subject to tax, tax gross up has the potential to greatly increase a corporation’s relocation cost.

Tax gross up is a legal business practice. If it is not done correctly, it can result in an audit and can bring adverse affects on your transferring employee and your corporation. An incorrectly filed tax gross could mean employees might have to file a tax extension. In some cases, they might need to file an amended tax return owing to wrong W-2 statements.  It’s advisable to hire services from a third party relocation management company that offers gross up tax assistance. 

When your transferee becomes a landlord

What to charge for monthly rent can be quite a challenge for those transferees that have never been a landlord.  When the property rents out too quickly it often indicates you are not charging enough for rent .   Setting it too high and the home will sit vacant.  So, how does your transferee go about setting a rental rate that is in line with the current market?

If your transferee is considering hiring a property management company to handle all operations and maintenance of the property, they can provide him/her with fair market value rents in the area which will illustrate the correct rental rate to charge. Some individuals prefer to do the research themselves first, regardless of the eventual outcome.

A great place to start is the Department of Housing and Urban Development or HUD.  Their website www.hud.gov contains information on Fair Market Rents for the 40th and 50th percentiles.  What does this mean?  Well, it is basically the rental dollar amount that 40% (or 50%) of the rents are below. Most areas will use the 40% mark, while larger metropolitan areas will fall into the 50% arena.  There are other websites that allow you to type in a city or county and receive basic rental rates for that region. This, of course, is very generic information, but it will give you a broad idea of where rents in your area stand.  Websites such as rentometer.com, rent.com, craigslist and rentals.com are quality resources for researching local rental rates.  Be sure to compare “apples to apples” when it comes to your property’s location, square footage, bedrooms and bathrooms.

Select a few homes that closely resemble your property from the best websites, and contact the owner or management company directly. Below are a few things to ask to make sure the home’s rental rate isn’t priced too high for the location. 

Are you underinsured?

What is carrier valuation?  Carrier valuation is a declaration by the transferee (person being moved) of the maximum amount of the carrier’s liability in the event of a transit-related loss or damage of their household goods.

Valuation is not insurance. In other words, valuation provides a certain level of protection for loss or damage caused by a carrier while the shipment is in the care, custody, and control of the carrier. The amount of coverage is predetermined by the transferee prior to the move and may not be sufficient in the event of a loss.

WHAT DOES IT COVER?

When you move, your personal property is loaded onto a moving truck. While most moves go smoothly, accidents do happen and some items may be lost or damaged during shipment.  Prior to the move a carrier representative will discuss with the transferee the amount of liability the carrier is responsible for in the event of loss or damage. At the time of the move a descriptive inventory list will be developed by the carrier and the transferee. This list includes the count and condition of the shipped items when they come into the care, custody, and control of the carrier. At times the transferee may have certain items that carry a higher value than normal such as artwork, jewelry, collectibles etc….

Rick Bruce, Regional Director of Business Development for Corrigan United Van lines, recommends any items of high value such as jewelry, coins, and iPods, be moved personally by the transferee.  If the transferee is unable or unwilling to do this, then these items must be recorded and reported on a special form called the high value inventory form (here is a sample).  “The determination of the value of the transferee’s entire shipment is a very important part of the moving process” he says.  The amount of coverage needed is pre-determined by the transferee prior to the move.

IS ADDITIONAL COVERAGE NEEDED?

There are times when the amount of coverage provided by the carrier (included in the agreement) will be insufficient. The carrier or a third party insurance company can provide additional coverage to the transferee for an additional cost.

The cost of this insurance is not included in the basic move and must be purchased separately by the transferee. If you purchase this coverage, the mover remains liable for a portion of the loss with the rest of the loss recoverable from the insurance company up to the amount of insurance you purchased.

The Federal Motor Carrier Safety Administration also advises that some actions may limit the mover’s liability. Please keep these in mind, they include:

• Packing perishable, dangerous or hazardous materials in your household goods without your mover’s knowledge.

• Packing your own boxes. You may consider packing your own household goods articles to reduce your costs, but if the articles you pack are damaged, it may be more difficult to establish your claim against the mover for the boxes you pack.

• Choosing Released Value coverage when your household goods are valued at more than 60 cents per pound per article.

• Failing to notify your mover in writing about articles of extraordinary value.

For additional information please consult with your household goods agent

SHRM February 2012 Employment Expectations Released

The SHRM Employment Expectations Report for February 2012 has been released.

Key findings:

• Hiring will be steady in both sectors in February.  Four out of 10 manufacturers (40.2 percent) will add jobs in February, and a net of 20.9 percent of service sector companies will conduct hiring.

• Recruiting difficulty edges up in both sectors. More HR professionals in both sectors reported increased difficulty with recruiting key candidates in January compared with a year ago.

• Some new hires see increases in compensation. In January, the rate of increase for wages and benefits rose slightly on an annual basis in manufacturing and services.

For more information please visit:

SHRM Employment Expectations Report for February 2012

How to pack electronics for moving

With lump sum/self move benefit programs growing in popularity, knowing how to properly pack electronics for safe shipment is good information to have.

Our electronic gadgets are becoming an extremely important part of our daily life and protecting them from damage is paramount.  Feel free to pass this link along to your transferees; it may save them some grief.

how-to-pack-electronics-for-moving

Relocation America achieves high marks for transferee satisfaction

Congratulations to our Client Services teams for achieving 98% transferee satisfaction for 2011.    These results are a direct reflection of your commitment to providing our clients and transferees with unparalleled service.

Relocation America believes that our service practices through dedication and commitment are essential to establishing and sustaining successful long-term relationships.

 

2011 Filing Season Tax Tips for Transferees

Tax season is upon us, with most Americans starting to put together the paperwork they need to file their returns.   The Worldwide Employee Relocation Council (ERC) has offered some tips to keep in mind when filing your return.

Here are several items deductible as moving expenses that are sometimes overlooked:

• Tips to the moving van driver or helpers.

• Mileage for driving second or third cars to the new location (in addition to the first car). The deduction for 2011 is 19 cents per mile from January 1 to June 30, and 23.5 cents per mile thereafter.  (The deduction will decrease to 23 cents per mile for 2012).

• Lodging expenses in the departure location for one night after the household goods are packed, and one night in the new location on the day of arrival.

• Moving household goods from a location other than your main home, up to what it would have cost to move them from the main home

• Storage of household goods for up to 30 days, including the cost of moving the goods into and out of storage.  Note that the costs for moving the goods into and out of storage remain deductible even if the goods are in storage more than 30 days.

• Expenses not reimbursed by your employer, such as extra crating, shipment of unusual items, tips to van line staff, etc.

And remember: You don’t have to itemize to deduct moving expenses.