Originally Posted by
GreaseA6
There is a line in the current CBA, Chapter 6 Relocation Expenses that I am curious about:
6.C.14 Income tax gross up benefits as provided in the Personnel Policy and Procedures Manual (3-86) dated October 2003.
Anybody got a clue?
Originally Posted by
FDXLAG
Albie
Great post especially liked the tax equalization is not a benefit part. Would just like to add Income Tax Gross Up* is already in the current CBA and may be better then Tax Equalization. So Tax Equalization could be a give back.
*would love to find a Personnel Policy and Procedure Manual (3-86) dated October 2003.
The Personnel Policy and Procedure Manual (The People Manual) is available on the FedEx INTRAnet at
http://library.fedex.com/library/cor...ople/index.htm . The latest Print Undate was June 25, 2006; the latest Online Update was June 1, 2007.
From Section 3-86 Relocation (Last revised June 25, 2006):
Policy
FedEx Express provides a package of benefits designed to help eligible employees relocate their permanent residence to their new domicile to meet operational and specific career development requirements with a minimum of disruption to the employee and operation. FedEx Express intends to provide a competitive and flexible program in meeting the employee’s needs as well as those of the Company.
Guidelines
Income Tax
Most relocation expenses and allowances paid by the Company to an employee or on behalf of the employee are considered taxable wages for federal and state income tax purposes at the time the payment is made. A portion of the amounts expended during a relocation may be deductible on the tax return(s) of an employee. Nondeductible expenditures, or allowances not spent, are subject to federal and state income taxation.
FedEx Express may offset this additional tax liability by means of a tax “gross-up” or “protection” calculation. This gross-up calculation does not apply to payments made under the Cost of Living Adjustment or Mortgage Interest Differential Plans. The gross-up does not apply to the Relocation Allowance or the 1-month salary payment if not used for relocation expense items defined by this policy.
Gross-up calculation is accomplished by a formula that takes the following into consideration:
- Total relocation expenses, as defined by this policy, paid by the employee or on behalf of the employee
- Deductible expenses
- Relocation-related expenses that are not tax deductible
- Increased tax brackets, loss of exemptions, and loss of standard deductions or itemized deductions
- Additional federal and state taxes that are incurred as a result of relocation
Any additional federal income tax liability incurred by an employee as a result of a relocation and determined to be covered under the gross-up provisions as defined by this policy will be paid either directly to the Internal Revenue Service (IRS) or reimbursed to the employee. The employee must show proof of payment of the tax.
All state taxes are subject to a maximum combined tax gross-up of 5%.
At the end of a year in which an employee receives any relocation benefits, the employee’s W-2 reflects the amounts paid to the employee or on behalf of the employee by the Company. In addition, the employee receives an itemization which identifies the relocation expenses and allowances paid by the Company (e.g., relocation allowance, household goods movement, closing costs). The itemization is provided in order to assist the employee identifying expenditures that may be treated as deductible. The employee must file an IRS Form 3903 with his tax return in order to claim moving expense deductions. Where applicable, some relocation expenditures may be deductible in determining state and local taxable income.
If an employee believes that an additional tax liability was incurred as a result of a reimbursement of relocation expenses, the employee must provide the following information to the Relocation Department by April 30 of the following year in which the relocation/income was incurred in order to determine the amount of the additional tax liability:
- Detailed information concerning how any relocation allowances and payments were spent. Receipts must be included in this detail.
- A copy of the employee’s tax return(s) for the year(s) in which the additional tax liability was incurred
Acceptable relocation-related expenses include
-
- Report to work trip.
- Housing search trip.
- Move to the new location trip.
- Pet transportation.
- Closing cost for permanent residence not covered by this policy.
- Lease cancellation penalties not covered by this policy.
- Temporary living expenses.
- Household goods movement/storage costs not covered by this policy.
- Long distance telephone calls, tips.
- Babysitting costs while on housing search trip.
The potential tax gross-up is calculated based upon the income and deductions actually reported in the employee’s income tax return(s), expenditures made by the employee that are not considered deductible, but are considered reasonable by the Company, and the additional income reported in the employee’s Form W-2.
Because of the complexity of income tax rules and regulations related to moving expenses, the Company urges employees to seek professional tax assistance in the preparation of the income tax return.
The following relocation expenses are considered taxable:
- Payments made to some third parties on behalf of the employee
- Taxes paid by the Company on behalf of the employee
- Mortgage Interest Differential and Living Cost Adjustment payments
- Certain relocation expenses reimbursed to the employee
- Relocation Allowance used by the employee for expenses incurred during the relocation
Employees are responsible for maintaining adequate documentation in order to support any amounts claimed as deductions on their income tax return(s) and/or reported as relocation expenditures. Amounts that may be considered deductible are shown in
Table 4.