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Old 05-08-2013, 03:29 PM
 
12 posts, read 22,221 times
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My new employer gave me a lump-sum allowance because I had to relocate to take the new job. If I understand correctly, that is all taxable income same as if it were in my regular pay, and (since I meet the time and distance tests) I can deduct the deductible moving expenses (regardless of if I paid them out of that allowance or out of regular pay, funds being fungible.)

My new employer also paid for me to take a half-day tour of my new city. Moderately useful. (The tour guide said she usually gets new graduates who have never lived anywhere on their own, or people who are new to the country. But she gave me some local tidbits it might have taken a while to figure out.)

Six months later my employer tells me they're going to withhold extra taxes from my next paycheck because the price they paid to the tour guide's service is taxable. The delay was for their invoice to come through, but they think it goes in current-year earnings rather than the year when I got the tour.

Is this right?

I had expected it would be like the value of my parking space or the chair I sit on while I work or the salaries of the recruiter and managers who interviewed me, or the Human Resources person who helps me claim my medical benefits. (That is, I don't see any money, so it isn't on my W-2.) What IRS category does this fit under?

And how do they figure the value? It seems like they are considering as income their entire cost for this service, rather than the value I received. (What is a reasonable cost for someone to drive me around, as would a real estate agent, for a few hours, if I had to pay for it myself?)
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Old 05-08-2013, 03:50 PM
Status: "On The Lookout" (set 29 days ago)
 
Location: The Triad (NC)
28,403 posts, read 61,862,013 times
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Quote:
Originally Posted by chesler View Post
My new employer gave me a (general purpose) lump-sum allowance...
...to reimburse your specific moving and relocation expenses; many of which are deductible.
Do you otherwise itemize your deductions?
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Old 05-08-2013, 04:00 PM
 
1,623 posts, read 4,326,029 times
Reputation: 1292
Quote:
Originally Posted by chesler View Post
My new employer gave me a lump-sum allowance because I had to relocate to take the new job. If I understand correctly, that is all taxable income same as if it were in my regular pay, and (since I meet the time and distance tests) I can deduct the deductible moving expenses (regardless of if I paid them out of that allowance or out of regular pay, funds being fungible.)

My new employer also paid for me to take a half-day tour of my new city. Moderately useful. (The tour guide said she usually gets new graduates who have never lived anywhere on their own, or people who are new to the country. But she gave me some local tidbits it might have taken a while to figure out.)

Six months later my employer tells me they're going to withhold extra taxes from my next paycheck because the price they paid to the tour guide's service is taxable. The delay was for their invoice to come through, but they think it goes in current-year earnings rather than the year when I got the tour.

Is this right?

I had expected it would be like the value of my parking space or the chair I sit on while I work or the salaries of the recruiter and managers who interviewed me, or the Human Resources person who helps me claim my medical benefits. (That is, I don't see any money, so it isn't on my W-2.) What IRS category does this fit under?

And how do they figure the value? It seems like they are considering as income their entire cost for this service, rather than the value I received. (What is a reasonable cost for someone to drive me around, as would a real estate agent, for a few hours, if I had to pay for it myself?)

I don't think it is right. The IRS has a guide on taxable fringe benefits in Pub. 521. It is basically supposed to be substitutes for income. Moving expenses are fringe benefits, but with certain tax rules. I don't think I'd characterize a tour as a moving expense. Since they provided it and if it was meant to ease your transition to the area to improve your productivity, I'd argue it wasn't a fringe benefit.

But is it worth fighting over? That's up to you.
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Old 05-08-2013, 06:15 PM
 
12 posts, read 22,221 times
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Quote:
Originally Posted by MrRational View Post
...to reimburse your specific moving and relocation expenses; many of which are deductible.
Do you otherwise itemize your deductions?
Yes I itemize. So I figure that was a wash: I got a lump sum of income, but I had a bunch of deductible moving expenses that reduced my income comparably (compared to if they had paid the movers themselves [or not paid for the move, or not hired me.])
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Old 05-08-2013, 06:18 PM
 
12 posts, read 22,221 times
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Thanks, I'll try to figure it out in Pub. 521. I haven't even seen how they're reporting it, I just got a heads-up my paycheck will be smaller, so I assume they're treating it like some kind of income, and the numbers they're talking about and their explanation suggest they're treating the entire invoiced amount for the tour as income to me. I guess I've got 11 months to figure it out.
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Old 05-09-2013, 07:37 AM
 
12 posts, read 22,221 times
Reputation: 13
Pub 521 is Moving Expenses. So moving the goods and people is deductible, but meals on the trip, getting a new driver's license, buying the new house, having carpet refitted, and losses from disposing of club memberships are not deductible. (If all the other tests are met, otherwise nothing is deductible.)
I'm not getting guidance from it (which is why I turned to this forum) if the cost of the tour is deductible, and in case anyone here has had one, at what valuation?

You suggested it's a fringe benefit, I guess other than moving, so I'll look for tax advice on those. But I guess I should see what box on the W-2 they put it in, and maybe my tax software will tell me.
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Old 05-09-2013, 07:56 AM
 
12 posts, read 22,221 times
Reputation: 13
Sorry to keep talking to myself :-)
Fringe Benefits are in Publication 15B.
Normal moving expenses are not taxable if the employee doesn't deduct them. (Not applicable here because I did, and I don't care since I itemize anyway, other than any 2% exclusion; that's not the question here.)
If this is not a "moving expense" it is apparently taxable at Fair Market Value, which is neither what it's worth to the employee, nor what the employer paid, but "[SIZE=2][SIZE=2]the amount an employee would have to pay a third party in an arm's-length transaction to buy or lease the benefit. Determine this amount on the basis of all the facts and circumstances."
So how much would I have to pay for a local to drive me around for two or three hours pointing out the good movie theatres, telling me which DMV has the shortest lines, and so forth? I guess I'll find out when I file in early 2014.
Since this is part of the standard package from my employer, they probably have an answer, but I won't ask until I get the W-2 and have an actual question.
Thanks, City-daters, for your assistance.
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