During the last month of 2010, Congress signed into law the Economic Growth and Tax Relief Act of 2010. The changes that we need to be aware of are:
• The new law reduced the employee's share of Social Security tax for 2011 from 6.2% to 4.2%.
• The new law extends the income tax rates for two years for everyone.
• Temporarily extends the 10% bracket.
• Temporarily extends the 25%, 28%, 33% and 35% tax brackets through 2012.
• The 15% top rate for capital gains and qualified dividends will remain for 2011 and 2012.
• Temporarily repeals the personal exemption phase-out.
• Temporarily repeals the itemized deduction limitation.
• Temporarily extends the current modified child tax credit. The amount stays at $1,000 per child and may be refundable.
• Per IRS Notice 2010-88 the 2011 mileage rates are:
o Business Standard Mileage Rate: 51 cents per mile
o Moving/Medical Standard Mileage Rate: 19 cents per mile
o Charitable Standard Mileage Rate: 14 cents per mile
• Two year alternative minimum tax (ATM) patch for exemption amounts:
o 2010 $47,450 (individuals) $72,450 (married filing jointly)
o 2011 $48,485 (individuals) $74,450 (married filing jointly)
Relocation Benefits Expense Management Software continually updates federal and state tax changes so that you can be sure that your employee expense management is handled properly.
To find out more about our EXPENSE MANAGEMENT SERVICES please contact me andy@relocationbenefits.com
Monday, January 10, 2011
Saturday, January 1, 2011
2011 IRS Mileage Rate
The 2011 Standard IRS Mileage Rate for the use of a car during the final trip from the origin location to the final destination is $0.19 per mile. Companies reimbursing mileage to employees on their final trip need to be aware of this difference from the standard business mileage reimbursement.
The standard business mileage reimbursement for 2011 is $0.51 per mile. This rate is up 1 cent from 2010 rates. This is a $0.32 sent difference from the moving mileage reimbursement.
Most companies include in their policy the reimbursement of miles driven at the standard business mileage rate. This practice is very common but during most audits by the IRS this is the one overlooked taxable expense that is missed during the taxable reimbursement reporting process.
For more information on our Relocation Tax Audit Service please give me a call or send me an email: 877-396-0132 or Andy@relocationbenefits.com
The standard business mileage reimbursement for 2011 is $0.51 per mile. This rate is up 1 cent from 2010 rates. This is a $0.32 sent difference from the moving mileage reimbursement.
Most companies include in their policy the reimbursement of miles driven at the standard business mileage rate. This practice is very common but during most audits by the IRS this is the one overlooked taxable expense that is missed during the taxable reimbursement reporting process.
For more information on our Relocation Tax Audit Service please give me a call or send me an email: 877-396-0132 or Andy@relocationbenefits.com
Sunday, March 14, 2010
Insurance Claim Settlement
One of the few unknowns during the relocation process is the insurance process or the valuation process when you actually have a claim for damage or loss during your household goods move. There are two different types of moves that have uniquely different coverages. The two types are the domestic move and the international move.
Looking at Domestic Moves, most movers probably 99% offer valuation protection. What is valuation? How does it differ from insurance? Valuation is like insurance however is a coverage that is provided by the moving company, trucking company or the like. It is not called insurance because it is a coverage that is handled by the moving company directly out of their general business expense. In cases where the claim is higher than the movers corporate insurance policy, the movers will turn the claim over to an insurance company to provide the claim adjustment or the settlement. However, it is still settled in line with the terms of the valuation coverage.
The minimal coverage that all moving companies provide when transporting household goods across state lines is $0.60 per lb per article. At $0.60 per lb per article a 200 lb dresser would have roughly $120.00 of coveage. $120.00 of coverage is enough to repair a minor nick or scratch, but is not enough if something gets totally destroyed. Let's take a look at a mirror or picture. If the movers pack up a mirror or a picture and it is estimated to weigh 20 lbs, the coverage would only be about $12.00. Most mirrors and pictures are going to cost more than $12.00 and most damage to a mirror or picture is going to be a total loss. Therefore, at $0.60 per lb, minimal coverage, there will not be enough coverage to compensate you for the damage or loss of the picture or mirror.
Let's look at the next level of coverage. Depending on which moving company you are talking to they all offer some variation of Full Replacement Value protection. This type of protection provides a higher value of protection per piece. The 200 lb dresser with a replacement cost of $1000.00 would have protection up to $1000.00. The 20 lb mirror with a replacement cost of $250.00 would have protection up to $250.00. This type of valuation coverage has an added cost and can also have deductible options.
What happens if there is a claim and you have Full Replacement Value protection? Most companies don't explain this thoroughly and it is good to know prior to making a move. If you have damage, the moving company has the right to repair or replace the items prior to making a cash settlement and salvaging the piece. Most moving claims are not catastrophic, yet some moving claims are for household goods that are precious to an individual or hold a higher intrinsic value because they are family heirlooms. Ussually, almost always, when there is damage to a family heirloom, there is never enough anyone can do to make the owner happy. However, the moving company will hire a professional to complete the repair or make retribution via cash to compensate you for the real value of the loss... Replacement Value.
If you ever have any questions about the claims process or how to make sure you are protected, please don't hesitate to call or email... 877-396-0132 - andy@relocationbenefits.com
Our next blog will be discussing International Insurance Coverage.
Looking at Domestic Moves, most movers probably 99% offer valuation protection. What is valuation? How does it differ from insurance? Valuation is like insurance however is a coverage that is provided by the moving company, trucking company or the like. It is not called insurance because it is a coverage that is handled by the moving company directly out of their general business expense. In cases where the claim is higher than the movers corporate insurance policy, the movers will turn the claim over to an insurance company to provide the claim adjustment or the settlement. However, it is still settled in line with the terms of the valuation coverage.
The minimal coverage that all moving companies provide when transporting household goods across state lines is $0.60 per lb per article. At $0.60 per lb per article a 200 lb dresser would have roughly $120.00 of coveage. $120.00 of coverage is enough to repair a minor nick or scratch, but is not enough if something gets totally destroyed. Let's take a look at a mirror or picture. If the movers pack up a mirror or a picture and it is estimated to weigh 20 lbs, the coverage would only be about $12.00. Most mirrors and pictures are going to cost more than $12.00 and most damage to a mirror or picture is going to be a total loss. Therefore, at $0.60 per lb, minimal coverage, there will not be enough coverage to compensate you for the damage or loss of the picture or mirror.
Let's look at the next level of coverage. Depending on which moving company you are talking to they all offer some variation of Full Replacement Value protection. This type of protection provides a higher value of protection per piece. The 200 lb dresser with a replacement cost of $1000.00 would have protection up to $1000.00. The 20 lb mirror with a replacement cost of $250.00 would have protection up to $250.00. This type of valuation coverage has an added cost and can also have deductible options.
What happens if there is a claim and you have Full Replacement Value protection? Most companies don't explain this thoroughly and it is good to know prior to making a move. If you have damage, the moving company has the right to repair or replace the items prior to making a cash settlement and salvaging the piece. Most moving claims are not catastrophic, yet some moving claims are for household goods that are precious to an individual or hold a higher intrinsic value because they are family heirlooms. Ussually, almost always, when there is damage to a family heirloom, there is never enough anyone can do to make the owner happy. However, the moving company will hire a professional to complete the repair or make retribution via cash to compensate you for the real value of the loss... Replacement Value.
If you ever have any questions about the claims process or how to make sure you are protected, please don't hesitate to call or email... 877-396-0132 - andy@relocationbenefits.com
Our next blog will be discussing International Insurance Coverage.
Monday, December 22, 2008
Relocation Audits by the IRS
One of the most confusing aspects of relocation is the tax consequences that are associated with providing relocation benefits to an employee. During my last 15 years in the relocation business I have heard time and time again from human resource professionals that they are correctly recording the taxable part of relocation . Even after I explain to them that they are doing it incorrectly, they still insist that their method is correct.
Why is this topic so imporant? IRS fines associated with relocation average between $6,000 and $8,000 per employee based on ERC data (http://www.erc.org/). If a company moves an average of 10 employees a year and you have not recorded relocation associated expenses as taxable income, you could be facing fines of up the $80,000.
Let's explore some scenarios that I have recently encountered and provided consultation:
Case Study 1 - House Hunting Trips -- Company A offers their new hires two house hunting trips for the trailing spouse. The trips cover air fare, car rental, meals and lodging. On average the company budgets $1100.00 per employee per house hunting trip to cover these expenses. Company A has their corporate travel department make all of the arrangements and invoice the company. Company A records these expenses as a business expense under the rules of business travelers. Is Company A properly recording these expenses?
Case Study 2 - Temporary Housing -- Company B offered an employee up to 6 months of temporary housing at the new location while their house was on the market at the old location. The employee reported to work at the new location and checked into temporary housing provided by a corporate lodging company. Company B recorded the next 6 months of lodging costs as a business expense because the employee had not sold their house and moved their family. Is Company B properly recording these expenses?
Case Study 3 - Reimbursement for Final Trip Miles -- Company C outlines in their policy that they will reimburse their relocating employees the prevailing IRS rate for mileage reimbursement. The Company interprets this rate to be the Business Mileage rate. They have the employee calculate the miles and submit the miles driven on an expense reimbursement. The company cuts an expense check to the employee. Did Company C properly reimburse these expenses?
Answers to Case Studies:
Case Study 1: This is a taxable benefit and should be recorded as income to the employee and taxed accordingly. (http://www.irs.gov/ ; Pulication 521)
Case Study 2: This is a taxable benefit to the employee and should be recorded as income to the employee and taxed accordingly. (http://www.irs.gov/ ; topic 511)
Case Study 3: The IRS has two separate mileage reimbursement rates. One for business milage and one for moving miles. Because Company C reimbursed at the Business mileage rate, part of this reimbursement is taxable and part is excludable. The portion of the reimbursement that is excludable needs to be recorded on the employees W-2 in Box 12 with a Code P. The taxable portion needs to be included as part of gross income and taxed. In the future, all relocation related mileage should be reimbursed at the IRs rate for moving purposes.
There are many different questions that I field on a regular basis in relation to relocation tax issues. Expense Management is one of the many services that we offer. We handle the complete recording and reimbursement of employee relocation expenses. Please call me or email for questions or more information about our services.
Why is this topic so imporant? IRS fines associated with relocation average between $6,000 and $8,000 per employee based on ERC data (http://www.erc.org/). If a company moves an average of 10 employees a year and you have not recorded relocation associated expenses as taxable income, you could be facing fines of up the $80,000.
Let's explore some scenarios that I have recently encountered and provided consultation:
Case Study 1 - House Hunting Trips -- Company A offers their new hires two house hunting trips for the trailing spouse. The trips cover air fare, car rental, meals and lodging. On average the company budgets $1100.00 per employee per house hunting trip to cover these expenses. Company A has their corporate travel department make all of the arrangements and invoice the company. Company A records these expenses as a business expense under the rules of business travelers. Is Company A properly recording these expenses?
Case Study 2 - Temporary Housing -- Company B offered an employee up to 6 months of temporary housing at the new location while their house was on the market at the old location. The employee reported to work at the new location and checked into temporary housing provided by a corporate lodging company. Company B recorded the next 6 months of lodging costs as a business expense because the employee had not sold their house and moved their family. Is Company B properly recording these expenses?
Case Study 3 - Reimbursement for Final Trip Miles -- Company C outlines in their policy that they will reimburse their relocating employees the prevailing IRS rate for mileage reimbursement. The Company interprets this rate to be the Business Mileage rate. They have the employee calculate the miles and submit the miles driven on an expense reimbursement. The company cuts an expense check to the employee. Did Company C properly reimburse these expenses?
Answers to Case Studies:
Case Study 1: This is a taxable benefit and should be recorded as income to the employee and taxed accordingly. (http://www.irs.gov/ ; Pulication 521)
Case Study 2: This is a taxable benefit to the employee and should be recorded as income to the employee and taxed accordingly. (http://www.irs.gov/ ; topic 511)
Case Study 3: The IRS has two separate mileage reimbursement rates. One for business milage and one for moving miles. Because Company C reimbursed at the Business mileage rate, part of this reimbursement is taxable and part is excludable. The portion of the reimbursement that is excludable needs to be recorded on the employees W-2 in Box 12 with a Code P. The taxable portion needs to be included as part of gross income and taxed. In the future, all relocation related mileage should be reimbursed at the IRs rate for moving purposes.
There are many different questions that I field on a regular basis in relation to relocation tax issues. Expense Management is one of the many services that we offer. We handle the complete recording and reimbursement of employee relocation expenses. Please call me or email for questions or more information about our services.
Monday, November 3, 2008
Relocation Policy - Lump Sum
Providing your employee with a lump sum for relocation purposes is one of the easiest ways to manage a relocation. At first glance it seems simple: 1. Cut a Check to the employee 2. Send it to them. Sounds pretty simple but it is truly penalizing the relocating employee.
How are you penalizing the employee? When providing a lump sum to an employee the IRS requires that you withold at minimum the supplemental rate for taxes. When adding up Federal, OASDI, Medicare and State Taxes this amount is going to average around 38% depending on what state and city that you are in. At 38%, if your employee was going to be given $5000.00 for a lump sum they will only realize after taxes about $3013. Plus your company has to match the Social Security portion (OASDI), another 6.2%.
Is there a better way? Absolutely! Some relocation expenses are taxable and some are not. In most cases employees need their lump sum to assist with household goods moving. Well household goods moving is a non-taxable expense as long as the employee is meeting the IRS 50 mile rule. Therefore if your company pays for the invoice directly or if you have the employee front the money and submit the invoice for reimbursement, your company and the employee save tax dollars.
Some people will pose the question that the employee needs the money up front to do other things besides household goods moving or the employee does not have enough room on their credit card to pay for the household goods move. Or even some companies do not want the burden of trying to manage several payments.
So what is the solution. Relocation Benefits offers Expense Management. Through our expense management process we pay the vendors invoices directly up to the approved amount providing tax guidance to the employee throughout the entire process. If there is money left over and you elect to give the employee the difference, we will process a net check amount for withholding and submit the numbers to your payroll processing department and even send the check to the employee based on how you elect for us to handle this.
So what does this accomplish, this gives your employee an extra $2000 in buying power. This gives your employee a process for managing their funds and it gives your employee a counselor or moving coach to help with the organization of the move process.
So what does this cost? Based on your company doing less than 25 moves a year, this service will cost you $140.00 more than you are currently spending on a $5000.00 lump sum. If you are giving the employee $10,000.00 for a lump sum, your company will be saving money.
For more information call me today: 877-396-0132 or Andy@relocationbenefits.com
How are you penalizing the employee? When providing a lump sum to an employee the IRS requires that you withold at minimum the supplemental rate for taxes. When adding up Federal, OASDI, Medicare and State Taxes this amount is going to average around 38% depending on what state and city that you are in. At 38%, if your employee was going to be given $5000.00 for a lump sum they will only realize after taxes about $3013. Plus your company has to match the Social Security portion (OASDI), another 6.2%.
Is there a better way? Absolutely! Some relocation expenses are taxable and some are not. In most cases employees need their lump sum to assist with household goods moving. Well household goods moving is a non-taxable expense as long as the employee is meeting the IRS 50 mile rule. Therefore if your company pays for the invoice directly or if you have the employee front the money and submit the invoice for reimbursement, your company and the employee save tax dollars.
Some people will pose the question that the employee needs the money up front to do other things besides household goods moving or the employee does not have enough room on their credit card to pay for the household goods move. Or even some companies do not want the burden of trying to manage several payments.
So what is the solution. Relocation Benefits offers Expense Management. Through our expense management process we pay the vendors invoices directly up to the approved amount providing tax guidance to the employee throughout the entire process. If there is money left over and you elect to give the employee the difference, we will process a net check amount for withholding and submit the numbers to your payroll processing department and even send the check to the employee based on how you elect for us to handle this.
So what does this accomplish, this gives your employee an extra $2000 in buying power. This gives your employee a process for managing their funds and it gives your employee a counselor or moving coach to help with the organization of the move process.
So what does this cost? Based on your company doing less than 25 moves a year, this service will cost you $140.00 more than you are currently spending on a $5000.00 lump sum. If you are giving the employee $10,000.00 for a lump sum, your company will be saving money.
For more information call me today: 877-396-0132 or Andy@relocationbenefits.com
Wednesday, October 29, 2008
Relocation Benefits, How important it is!
Relocation Benefits was created to assist employees with the many daunting and stressful tasks of relocating to a new area. Our services assist the employee, the family and the human resource professional. Working in conjunction with the hiring managers we manage the company relocation policy assisting with both international and domestic USA moves.
Our relationships with the many providers/suppliers needed during a relocation allows employees and companies to save money by utilizing our buying power, negotiated rates and proven service providers.
Our services include: Temporary Housing, Household Goods Moving and Storage, Expense Administration and Gross Up Calculations, Policy Counseling, Area and School Tours, Home Finding, Rental Assistance, Mortgage Assistance, Home Sales Assistance, Visa and Immigration Assistance, Cross Cultural Training and Insurance Assistance. This is not an all inclusive list there are many, many other services that an employee or company may use and we can administer.
Our relationships with the many providers/suppliers needed during a relocation allows employees and companies to save money by utilizing our buying power, negotiated rates and proven service providers.
Our services include: Temporary Housing, Household Goods Moving and Storage, Expense Administration and Gross Up Calculations, Policy Counseling, Area and School Tours, Home Finding, Rental Assistance, Mortgage Assistance, Home Sales Assistance, Visa and Immigration Assistance, Cross Cultural Training and Insurance Assistance. This is not an all inclusive list there are many, many other services that an employee or company may use and we can administer.
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