FREQUENTLY ASKED QUESTIONS
Relocating Employees FAQ
Applicability of the Policy
- When are the relocation expense payments added to my paycheck?
- If you are paid a lump sum amount to cover any relocation expenses, your department will add that amount to your gross pay. Your department should be able to tell you when to expect that payment.
- As for moving expenses paid by reimbursement, those are reported to Payroll Services daily, and the value of the taxable expense reimbursement is added to your gross pay, for tax reporting purposes only, on the next available pay cycle. Depending upon the total amount reimbursed the reimbursement may be split over 1, 2, or more pay periods.
- How is the payment for relocation expenses taxed when added to my gross pay?
The Relocation Lump Sum or the taxable moving expenses reimbursed, are taxed at the IRS supplemental rate. For more information about tax withholding at the supplemental rate, see Supplemental Tax Withholding on the Payroll Services web site.
- Why are all payments for relocation expenses taxed?
As of January 1, 2018, the Tax Cuts and Job Act eliminates deduction for qualified (non-taxable) relocation expenses. All relocation expense payments, whether previously deductible or not, are now taxable to employees, whether reimbursed or paid on their behalf.
- Are units permitted to “gross up” the lump sum to cover the employee’s tax burden?
No, units are not allowed to “gross up” the lump sum offered to new employees.
- I incurred a relocation expense in December. The reimbursement did not appear on my pay statement until January. Why the delay?
Relocation reimbursements are made by adding the amount to the employee's paycheck. Employees are paid every two weeks, so reimbursements or hours worked are not paid real time, but are subject to a time lag. It could happen that an expense could be incurred at the end of one year and reimbursed early in the next.
Relocation expenses, like other types of compensation, are considered taxable when paid. Even though the expense was incurred in one year, it becomes subject to withholding and reporting in the year it's actually paid.
- Can I be reimbursed for actual gasoline costs, or do I have to be reimbursed the standard moving mileage rate?
As long as you keep accurate records of each expense, you can be reimbursed for actual gasoline costs incurred for travel from your old house to new house, instead of the standard moving mileage rate. Whether you use actual expenses or the standard mileage rate to figure your expenses, you can also be reimbursed for the parking fees and tolls you pay to move.
- Why is my lump sum added to my gross pay?
The lump sum payment becomes part of your wages when paid to you through Payroll, and is subject to withholding and Form W-2 reporting.
- Do departments need to budget for fringe charges attached to a lump sum payment to an employee for relocation?
Yes, when budgeting for relocation payments, departments must include the amount to be charged for fringe. The fringe charged to the department on this earnings code (MRL) changes annually.
Ensure the unemployment, workers comp, FICA, and Medicare amounts applicable to the employee's classification are used in your calculations. For example, in FY 2011 the rates were as follows:
Non-Academic Employees Academic Employees Unemployment (UI) .85% .1% Workers Comp 1.01% .1% FICA 5.95% 5.19% Medicare 1.42% 1.42%
These percentages are based on the rates on the Fringe Table. Fringe rates are determined and maintained by Accounting Services.