Relocating Employees

Applicability of the Policy

1. 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.

2. How is the payment for relocation expenses taxed when added to my gross pay?

   The Relocation Lump Sum is 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.

3. Why are all payments for relocation expenses taxed?

   As of January 1, 2018, the Tax Cuts and Job Acts eliminates deduction for qualified (non-taxable) relocation expenses.  All relocation expense payments, whether previously deductible or not, are now taxable to employee.

4. 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.

5. 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.

6. 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 amount of fringe charged to the department on this earnings code (MRL) changes annually.

   These percentages are based on the rates on the Fringe Table. Fringe rates are determined and maintained by Accounting Services.