Relocation America International, as a partner of Atlas Vanlines, is pleased to announce the results of the relocation industry’s first and longest-running survey into corporate relocation policy and practice.
For this year’s edition a total of 435 individuals responsible for relocation as part of their professional duties took part in the survey. Among the topics discussed in the survey were r
2018 Corporate Relocation Key Findings:
- The majority of organizations (74%), regardless of size, have plans to implement policy changes in response to recent passage of the U.S. Tax Cuts and Jobs Act. Among organizations planning policy changes in 2018, the most popular planned change across organizations was to gross-up taxable relocation benefits.
The top factor affecting relocation last year was a lack of local talent.
Family concerns held the top spot among reasons why relocations were declined by employees, with spouse/partner employment in second place over the same period.
Even though most organizations reported improved financial performance, cost containment remains near historical highs. Even as firms expect increases in relocation costs, controlling the impact remains a priority.
More than two-thirds of companies outsourced relocation services last year.
Over the last few years, many organizations have used candidate assessments to support successful relocations. This year, nearly two-thirds of organizations assess candidates prior to relocation, down slightly from around three-fourths over the past three years, but maintaining a marked increase over the roughly half of firms that performed vetting from 2012 to 2014.
As lump-sum usage has grown, the survey incorporated additional questions about monetary ranges for the categories of reimbursement. Compared to the past five years, most offerings are more frequent and generous than in 2013 and on par with 2014, despite some dips below ranges reached in 2015. The overall median ranges are the highest in five years for: household goods shipping/storage, entire relocation cost, temporary housing, and miscellaneous expense allowance. However, offerings for real estate assistance/transactions, rental assistance/transactions and travel expenses fall one range lower.
About Relocation America International
Relocation America International is a full service relocation management company dedicated to providing innovative relocation services, value added support, and superior customer service to clients relocating families domestically and internationally. Visit http://www.rainternational.com for more information about our services or contact us at email@example.com.
Prior to passage of the Tax Reform Bill certain moving expenses were considered excludable/deductible if certain criteria were met. The criteria included meeting the time and distance tests. The transferring employee needed to commence work in the new job (at the new work location) and work full-time for at least 39 weeks within the first 12 months after the move. He/she also needed to demonstrate that the new place of employment was at least 50 miles away from the old home than the old place of employment. The new tax reform law effectively negates the need for the above criteria since moving expenses are no longer deductible/excludable.
Relocation-Related Tax Reform Implications
- The mortgage interest deduction was reduced to $750,000 from $1,000,000 for mortgages originating on or after December 15, 2017. This is likely to affect transferring employees looking to purchase homes in higher cost of housing areas. Recruiting talent to relocate to these areas could become problematic.
- The state and local tax deduction is now capped at $10,000 in 2018 through 2025. This again could impact employees transferring into higher tax states as the cap will decrease the ability to deduct these items.
- Tax Rates and Income Brackets: The law’s seven federal tax brackets will now have the following rates:
Relocation America International is actively working with our clients and prospects to insure their programs are fully compliant with the new tax law and relocation policies are updated to reflect the new tax reality.
The above information is for general information only and is not presented as tax advice. Please consult with your tax advisor prior to making decisions and taking any action. For more information contact us at info@RAInternational.com or visit www.RAInternational.com
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 up 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.
Gross-up/tax assistance on taxable relocation expenses is not required by the IRS; gross-up is a benefit that a company chooses to give to transferees who qualify. Most relocation policies offer some sort of tax assistance to transferees so their out-of-pocket tax costs due to the relocation are eliminated or reduced. One thing to keep in mind is that the gross-up payment itself also is taxable to the employee and subject to withholding and payroll tax. Therefore, to fully tax protect the employee, the gross-up must itself be “grossed up,” and the gross-up of the gross-up must be grossed up, and so on.
There are a few different methods used to calculate the gross up (inverse method, true up and simple method) and depending on how a company calculates the gross up, an employee may still end up owing money at tax time. Below is a comprehensive explanation of how each method applies to income. Managements generally maintain that the tax gross-up is a valuable tool for hiring and retaining talented executives. It is generally accepted within the relocation industry that transferees should not have to absorb the stress of relocation and suffer financially as well.