Relocation Expense Reimbursement Agreement

Moving costs. [PARTY A] reimburses [PARTY B] reasonable costs [up to [REIMBURSEMENT CAP]] incurred in connection with the move to [PLACE OF RELOCATION]. reimbursement of the real estate commission [PARTY B] on the sale of their home, which must not exceed $50,000; The agreements to reimburse the employee`s moving expenses vary. For example, employers and workers may agree that the employer will reimburse the worker for the transfer of personal belongings to the new site and possibly a return flight for the worker and his or her family; or the employer may agree to reimburse the worker for all moving and related costs, up to a maximum amount. Regardless of whether the refund is taxable income for the worker and is subject to section 409A of the Internal Revenue Code (the “code”) but the terms of the agreement do not comply with the requirements of the code, the worker may be required to pay a 20% excise duty on the refund. When an employer asks a worker to move his or her primary residence to work or continue working, the employer, often the employer, will be willing to pay some or all of the worker`s “moving costs” to induce the employee to accept the offer or pursue a job. Employers need to be aware of the critical tax implications that can result from such regulation. Not all moving or moving expenses are treated in the same way for income and wage tax purposes. In general, in the event of a move within the United States, a worker may deduct from his gross income the reasonable expenses related (1) to the move of his household goods and personal belongings, and (2) go to his new home. However, these categories of expenses are deductible only if all the following conditions are met: (1) The move is closely related to the beginning of employment, (2) the new workplace is located at least 50 miles from the previous place of residence than the worker`s former place of residence and (3) the worker works full-time on the new site during the first 12 months of employment. The authors of this question should also point out that the reimbursement of moving expenses has tax consequences. As a general rule, employees must report all refunded moving expenses. See 521: Moving Expenses, IRS (2013).

An agreement to reimburse a worker`s moving expenses may or may not exceed tax years, but if the refund can be made in a subsequent tax year pursuant to the agreement, it constitutes deferred compensation in accordance with Section 409A and there are important documentary and operational requirements that must be met in accordance with Section 409A. If the agreement does not meet these documentary and professional requirements, the amount of the worker`s reimbursement could be subject to the excise of 20%. If the moving expense reimbursement agreement does not meet the above requirements or if the employer reimburses the worker for expenses that are not considered deductible moving expenses of the above type, the amount is subject to income tax, social insurance and Medicare taxes. For example, employers may agree to pay for return trips to the former place of residence, hunting expenses before moving, temporary accommodation, storage costs for personal property (excluding transit costs) or costs associated with entering into a new lease or terminating a previous lease. The reimbursement of these expenses is non-negotiable in income deposits and is subject to Social Security and Medicare tax, as they are not considered the type of fees that may be deductible, even if they meet the conditions that must be excluded from the compensation. Since refunds are taxable, due consideration should be given to the fact that the refund is an unqualified deferred allowance under Section 409A.