By Javier Martinez,

Director of Payroll Management Services

October 2008

Relocation Reimbursement

Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting

Initial Test of DeductibilityTime Test

During 12 month period immediately following the move, employee must work full time for at least 39 weeks.

What if he does not stay 39 weeks? What do we do?

Answer: Nothing

Initial Test of Deductibility

Distance Test New workplace must be 50 miles further from employee’s former

residence.

Old Work

Home

New Work

10 miles 60 miles

Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting

Deductible Moving ExpensesOnly two types of deductible Relocation

ExpensesTransportation of Household goodsTraveling

Deductible Transportation of Household GoodsReasonable expenses incurred …

PackingMovingInsuringStoring In-Transit

○ 30 day limit○ From old residence and before delivery to new

residence

Employer can pay Moving Company directly

Deductible Relocation Travel ExpensesReasonable expenses incurred…

Transportation○ Flights○ Automobile (Self-drive)

Mileage: $0.27 per mile (Effective 07/01/2008)Actual Receipts

Lodging

Relocation IRS Requirements Initial Tests of Deductibility Deductible Moving Expenses Reporting

Qualified Relocation Expense

Relocation expenses must pass both criteria…

Wages

“All remuneration for employment, including the cash value of all remunerations (including benefits) paid in any medium other than cash” IRC §3121(a)

Great News!

Qualified Relocation Expenses reimbursements are Non-Taxable Fringe Benefits

Amounts paid or reimbursed by the employer are a non-taxable fringe benefit to the extent the moving expenses qualify for a deduction and if the employee did not deduct them in a previous year. IRC §132(a)(6), §132(g)

Reasonable Expenses

“Reasonable” ExpensesWhat are reasonable expenses?

What does this mean?

Relocation expenses are deductible only to the extent they are reasonable under all circumstances related to the move. IRS Reg §1.217-2(b)(2)

Transportation Expenses Packing Moving In-transit storage Includes specialized

Movers○ Pianos○ Oversea Shippers

Traveling Expenses Transportation Lodging

Non-deductible Expenses (IRS Pub 521) Any part of the purchase price of the new home Car Registration (tags) Driver’s License Expenses of buying or selling a home Home improvements to help sell your home Loss on the sale of home Mortgage Penalties Pre-move house hunting expenses Real Estate Taxes Refitting of carpet and draperies Return trips to former residence Security Deposits Storage Charges (excluding In-Transit)

Relocation Expense Reimbursement Reporting

How does the IRS know?

Answer: We are required to tell them.

Relocation Expense Reimbursement Reporting to IRS Qualified Moving Expenses

Reimbursement:Form W-2: Box 12 Code P

○ i.e. P 1200.00

Non-Qualified Non-Deductible: Form W-2: Box 1 , 3, and 5

Relocation Reimbursement

UTSA Relocation Reimbursement Requirements Relocation Authorization Relocation Limit Reimbursement Criteria Relocation Reimbursement Payment

Procedure

UTSA Relocation Amount Authorization Vice-President Level Authorization

Required Vice-President may delegate

Delegation of Authority Memo

UTSA Relocation Amount Limit 10% of Computed Annualized Salary of

the prospective employee Not required to offer Relocation

Reimbursement, nor to the employee limit

Exception to 10% Limit: Approval by Vice President Business Affairs(or ) Approval by President

UTSA Relocation Reimbursement Criteria Qualified Transportation of Household

Goods Qualified Travel Qualified Lodging Meals* Pre-move House Hunting* Temporary Housing* Storage**Taxable Income to the employee

Relocation Payment Process Reimbursement Process: submit to Payroll

Offer Letter of Employment (must contain Relocation Amount)

Original ReceiptsLocal Funds Voucher

○ Employee’s Signature○ Account Signer Approval Authority○ Vice-President Approval Authority (one of the following)

On Offer Letter Email attached to Offer Letter Co-sign Local Voucher Delegation of Authority Memo on file with Payroll Office

Direct Pay to Moving Company via P.O.

UTSA Relocation Reimbursement Questions?