What You’ll Get

Orion Mobility’s 2020 Mobility Tax Guide includes everything you’ll need to know for the 2019 tax year.

Topics Include:

• Tax rates and key info for 2019 filings
• What to watch for in 2020
• How to complete the new home closing statement

Download your copy.

Don’t Forget About Mobility Exepenses

By Peter Fonseca of Orion Mobility
Mobility magazine | September 2019

If I had to describe today’s mobility industry in two words, I’d say “compliance conscious.”

Immigration has become more complex and regulated, duty of care is more critical than ever, and tax statutes are being upheld more sternly in countries around the world. Therefore, there’s a lot of auditing around these segments.

However, another component has been emerging in the context of compliance – mobility expense management. Previously, mobility-related expenses mostly hovered below the radar as auditors homed in on broader targets, such as business expenses and corporate taxes. Yet mobility expenses are different than the average business expense and also require special tax treatment. These expenses entail a myriad of processing codes and varying tax approaches.

How these expenses are managed affects everything from an employer’s finances and tax liability to its talent acquisition and retention. As such, more companies are conducting thorough audits and ensuring compliance to mobility policies, supplier contracts, and relocation taxes.

Are you doing your due diligence? An effective audit starts with the right auditor and covers what matters.

Read the article.

The What, Why & How

By Shawn Sweeney of Orion Mobility
Mobility magazine | January 2019

As global mobility professionals, we often wonder what the best global mobility model is for our company. Should I outsource global mobility? Should I handle some functions in-house? What does the best global mobility model look like?

However, there is no single best global mobility model. For some companies, outsourcing the whole global mobility function is best; for others, doing everything in-house is most effective; and for yet a third group, a combination of in-house and outsourced services works best. So if there is no one single best global mobility model, you may wonder, “How do I determine the best model for my company?”

Read the article

How to Rightsize Your Policy to Fit Company Needs

By Martijn Bouwman of Orion Mobility
Mobility magazine | October 2018

Julie was recruited to take on an executive role at a fast-growing startup, but it required her to relocate from Chicago to Cleveland. The company’s recruiter considered Julie a “purple unicorn,” which means a rare find, and offered her a generous salary of $350,000 with a competitive relocation package of $30,000. Julie and her family decided to transition to a smaller city because of this opportunity. In addition to being a boost to Julie’s career, the move led to a larger house in a quiet suburb complete with an exceptional school district.

Months passed as Julie and her family settled in to their new community. After spending the holidays in the new home, Julie met with her accountant. Much to Julie’s surprise, she owed more than $11,000 in income tax.

“It’s due to the reimbursements you received for your relocation expenses,” the accountant explained. “It wasn’t grossed up properly.”

Julie was not expecting this financial liability and felt her company had overlooked a large detail in an otherwise well-planned relocation.

Read the article.

Knowing that companies typically invite only their top candidates to an in-person interview, you wonder why the travel booking and interview travel expense reimbursement processes are not better managed. Providing a world-class candidate experience throughout the hiring process to then “drop the ball on the five yard line” can jeopardize a well-planned candidate experience.

Join Talent Board for a panel discussion webinar with Ms. Judy Ball – Principal at JMB Consulting, and former Head of Talent Acquisition for Zurich NA, and Ms. Eileen Boyle – System Director Executive Development and Recruitment at Presence Health, moderated by Vice President of Client Development at Orion Mobility, Martijn Bouwman. The webinar will cover:

• Examples of best practices and worst case scenarios
• Short-term actions you can take to turn something potentially damaging into something that improves the candidate experience
• Learn about what other companies are doing with very little budget

View the webinar

We’ve been fielding a lot of gross-up questions since the Tax Cuts and Jobs Act (TCJA) took effect January 1. For the most part, moving expenses are no longer tax deductible and employees may face an increased level of tax exposure. Employers who gross up moving expenses must pad their relocation budgets to further insulate workers from personal tax liabilities.

The shift has prompted employers to re-examine policies and rethink rates; an exasperated few have asked, “Should I even bother with gross up?” Here are 5 things employers should understand:

1) The Importance of Gross-Up

As the war for talent rages, employers must recruit and retain high quality job candidates. A competitive relocation package, complete with tax compensation, can make or break a job offer. Despite recent changes to tax laws, employers are still grossing up expense reimbursements. According to a recent AIRINC report,*:

• 85% of employers plan to gross up moving expenses
• 4% will not gross up moving expense reimbursements
• 11% are still deciding

Relocating employees now shoulder a heavier tax burden. Competitive employers will provide much-appreciated financial relief.

2) Rate Options

How should you gross up expense reimbursements? There are many different options, but the three main ones are listed below. As you will see in #4, the rate you choose will have varying impacts on employees, as well as your bottom-line.

• The marginal rate is based on the employee’s actual tax status, and it takes into account the employee’s filing status and gross income.
• The supplemental rate is based on a set of standard withholding rates as determined by the Federal, State and Local governments.
• The flat rate is a specific rate that is determined by the employer.

 3) Grossing Up the Gross-Up

Like the reimbursed moving expenses themselves, the gross-up to compensate for the additional tax burden is taxable. That leads to the question: Are you going to gross up the gross-up payment? If you want to fully tax protect your transferees, the answer would be yes.  A vast majority of companies do gross up the gross-up.

• The inverse method accounts for the additional tax liability the gross-up payment creates, i.e. the tax-on-tax exposure. The inverse rate formula is: Tax Rate / (1-Tax Rate) = Inverse Gross-up Rate
• The flat method does not compensate for the tax-on-tax liability, but just uses the marginal, supplemental or flat tax rate to determine the gross-up amount.

 4) The Impact of Your Approach

These examples demonstrate that the decision to use a certain rate can significantly impact the employee’s tax burden and the employer’s cost.

Scenario 1: Employee moves with family to Illinois.

• Tax filing status: Married Filing Jointly (MFJ)
• Gross annual income: $65,000
• Moving expenses reimbursed by employer: $10,000

Gross-up amounts:

Considering that the Marginal inverse rate ($3,263) is the closest to the employee’s actual tax liability:

• You would underpay the employee $803 by using the marginal flat rate.
• You would overpay the employee $197 by using the supplemental flat rate.
• You would overpay the employee $2,028 by using the supplemental inverse rate.

Scenario 2: Employee moves with family to Oklahoma.

• Tax filing status: Married Filing Jointly (MFJ)
• Gross annual income: $340,000
• Moving expenses reimbursed by employer: $30,000

Gross-up amounts:

• You would underpay the employee $7,659 by using the marginal flat rate.Considering that the Marginal inverse rate ($19,464) is the closest to the employee’s actual tax liability:

• You would underpay the employee $10,659 by using the supplemental flat rate.
• You would underpay the employee $7,002 by using the supplemental inverse rate.

 5) Where Gross-Up is Going

Based on AIRINC’s report, 57% of companies use the supplemental rate while 32% use the marginal rate. However, this is shifting. Here are the trends we’re seeing as a result of tax reform:

• More companies are moving towards marginal rates
• More are calculating during year, avoiding year-end delta adjustments
• Some payrolls want to avoid delta adjustments, especially negatives

For those who are unfamiliar, a year-end delta adjustment compares the gross-up paid out during the year with a year-end reconciliation calculation, typically based upon marginal tax rates determined by the transferee’s gross income and marital status. The differences would be processed through payroll as withholding adjustments.

Relocation tax laws have changed, which means your gross-up approach may need to change, too. By understanding the five points above, you can determine how to best serve your job candidates, employees, and the bottom-line.

 *U.S. Domestic Mobility: Impact of Recent Changes to U.S. Tax Laws; AIRINC 2018

Today the House and Senate voted on and passed tax reform. The bill, titled The Tax Cuts and Jobs Act, is on its way to the President for his signature and changes will take effect on January 1^st.

The biggest change affecting our industry is the elimination of the exclusion/deduction for moving expenses such as the shipment of household goods, storage, and final move costs except for military moves. For companies that gross up for taxable reimbursements, this will mean several thousand dollars more in gross-up per transferee.

Some of the changes are temporary through 2025 and would return to current laws barring any further legislation being passed. Below is a breakdown of some of the changes comparing this year with next year:

• Moving Expense Deduction (most shipment, storage, and final move costs)
  • 2017: Excludable/deductible for qualified moves
  • 2018: The exclusion/deduction is eliminated except for military moves
• Federal Tax Brackets & Rates
  • 2017: Seven brackets with top rate of 39.6%
  • 2018: Seven brackets but with some lower rates, including a new top rate of 37%
• Supplemental Withholding Rate
  • 2017: 25%, and 39.6% if supplemental income exceeds $1,000,000
  • 2018: 22%, and 37% if supplemental income exceeds $1,000,000
• Standard Deduction Amounts
  • 2017: $12,700 if MFJ, $6,350 if SNG or MFS, and $9,350 if HH
  • 2018: $24,000 if MFJ, $12,000 if SNG or MFS, and $18,000 if HH
• Mortgage Interest Deduction
  • 2017: Deductible with cap of $1,000,000
  • 2018: Deductible with cap of $750,000, but includes a transition rule exception
• State/Local Income/Sales Tax and Property Tax
  • 2017: Deductible
  • 2018: Deductible up to $10,000
• Exemption Deduction
  • 2017: $4,050 deduction per exemption
  • 2018: Exemption deduction is eliminated
• Child Tax Credit
  • 2017: $1,000 per dependent child under 17 but subject to phaseout if AGI exceeds $110,000 if MFJ, $75,000 if SNG or HH, and $55,000 if MFS
  • 2018: $2,000 per dependent child under 17 but subject to phaseout if AGI exceeds $400,000 if MFJ and $200,000 for others
• Other Dependent Credit
  • 2017: Not available
  • 2018: $500 per other eligible dependents
• Itemized Deduction Phaseout
  • 2017: Deduction phases out for higher incomes
  • 2018: Phaseout is eliminated
• Medical Expense Deduction
  • 2017: Deductible for expenses exceeding 7.5% of AGI (it was going to be 10%, but the new law retroactively lowers it to 7.5%)
  • 2018: Deductible for expenses exceeding 7.5% of AGI, but returns to 10% in 2019
• Gain on Sale of Home
  • 2017: Can exclude gain of up to $500,000 if MFJ / $250,000 if SNG if primary residence for at least 2 of previous 5 years (with exceptions)
  • 2018: No change to rule, despite indications it might increase to 5 of previous 8 years
• Individual Alternative Minimum Tax
  • 2017: Some taxpayers subject to AMT
  • 2018: Retained, but with higher exemption amounts
• Health Care Mandate
  • 2017: Requires all to have insurance or pay a fine/tax
  • 2018: Mandate is eliminated
• Corporate Tax Rates
  • 2017: Top tax rate of 35%
  • 2018: Top tax rate of 21%