Two major tax bills were recently enacted which have affected both corporate and government tax assistance, gross-up policies and payment calculations made on relocation payments in 2013; the Patient Protection and Affordable Care Act and the American Taxpayer Relief Act.
The Patient Protection and Affordable Care Act added an additional new 0.9% Medicare tax when an employee’s FICA wages exceed $200,000 ($250,000 for someone who is married and files a joint tax return). The additional Medicare tax will increase the tax cost on relocations for higher income level transferees.
The American Taxpayer Relief Act contains a wide array of tax provisions that will affect all transferees that have taxable 2013 relocation expenses. The biggest change pertains to payroll taxes. Wage earners will now pay a 6.2% pay-roll tax on the first $113,700 in wages since the deal did not extend the 4.2% rate that had been in place for the past two years. This change will increase the tax cost for corporations that relocate an employee whose annual earnings are less than $113,700.
According to Ineo (global mobility tax specialists), the recently enacted American Taxpayer Relief Act affects both corporate and government tax assistance, gross-up policies and payment calculations made on relocation payments in 2013.
For a complete description of what is and isn’t included in both acts click here: 2013 Relocation Tax Changes