2013 Relocation Tax Issues

tax newsTax assistance is an expensive cost of corporate relocation programs and the third most expensive benefit in a relocation program, on average, after home sale and household goods.

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

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s