1. Taxability of Relocation Expenses
A continued discussion February 28, 2018
This session will start at 3:03pm on February 28, 2018 – please mute your phone during the presentation unless you are asking a question. Thanks.

2. IRS Tax Law Change
Beginning in 2018, an employee can no longer deduct personal moving expenses nor can an employer pay or reimburse an employee’s personal moving expenses on a tax-free basis. However, the employer can continue to pay such moving expenses to be treated as taxable W-2 wages through Payroll.

3. Labs
This discussion does not include Lab moves. These are still University related expenses and follow the historical procedures.

4. House Hunting Trips
Prior to and after the 2018 tax law changes, House Hunting trips remained a taxable payment to the future employee. The change is that UAB can incorporate these into the same package as the Relocation Allowance. In combination, we will refer to them together as relocation allowance.

5. The Relocation Allowance is taxable and reportable on the W-2, the discussion points are:
Paying the future employee or reimbursing the relocation company
Timing of the payment
Taxing the payment

6. Dually Funded employee
The relocation allowance for any dually-funded employees should generally be provided thru the entity which has the higher rate of pay
(ie – a dually funded MD who earns $20k on UAB and $200k on HSF should receive relocation allowance thru HSF so as not to create issues in providing a net UAB payment that covers the taxable impact of a $20k move

7. This is a discussion of the proposed plan.
Policies and websites have not been updated
Procedures have not been finalized
The plan has been discussed with senior administration but has not been approved

8. Paying the future employee or reimbursing the relocation company
There doesn’t appear to be any benefit to reimbursing the relocation company. UAB’s proposed solution does allow a future employee access to our contract pricing but the payment to vendor is made by the future employee. Any exception to pay the vendor directly (under extreme circumstances) instead of the future employee must be approved by AVP -Financial Affairs but doesn’t change the taxability of the payment to the future employee.
Lab moves would remain as a contracted move through UAB.

9. Timing of the Relocation Allowance payment
The UAB proposed plan allows the future employee to choose from the following two options:
A- Receive 100% of the payment up to two months prior to relocation through Accounts Payable (AP), or
B – Receive 60% through AP up to two months prior to relocation and 40% through Payroll.
The election form can be turned into Central Administration once an amount and relocation date is determined.

10. Timing of the Relocation Allowance payment
If the hire date has passed, then the all relocation allowances are paid through payroll
The previous guideline had a 12 month time limit to submit reimbursement but now there isn’t a deadline. However, the relocation allowance must be in the hire letter.

11. Election A
100% of the payment prior to the hire date, UAB will need a W-9 (W-8BEN) to set them up as an AP vendor. A relocation allowance payment to the individual via AP with no taxes withheld would be disbursed to the future employee.

12. Election B
Splitting the payment 60/40, with 60% paid up to two months prior to the relocation 40% via payroll upon hire.
UAB will need a W-9 (W-8BEN) to set them up as an AP vendor.
A relocation allowance payment to the individual via AP with no taxes withheld would be disbursed to the future employee.
A payroll relocation allowance for 40% of the total relocation allowance would be processed on the first full payroll in combination with the taxation of the AP relocation allowance.

13. Employee paid 100% through Payroll
100% of the payment through payroll, payroll relocation allowance for 100% of the total.

14. Additional payments to the Relocation Allowance
Any additional relocation allowance payments made after the future employee has elected the disbursement path are processed only through payroll
FYI- the timing of these payments one-time and may be in combination with the predetermined allowance and cause further taxation.
These additional payments would require dean/VP approval (or delegate).

15. Taxing of the payment?
These payments are taxable. Since AP payments are not W-2 reportable, the taxes and taxability have to occur once the employee is hired and active on the payroll.
The AP payment would be recovered and the taxable payment processed through payroll

16. Taxing of the payment?
Election A – the taxation would be divided between the first and second full payroll
If not divided, you could easily take 100% of the pay
Election B will occur on the first regular payroll for the employee.
Regular payroll is defined as a full rate of pay on the assignment relating to the move. This is indicated to avoid mid-pay period pays.
100% payroll is in combination with the regular payroll

17. Gross Disbursement – Example $15,000
AP Check
Payroll Check
TOTAL
Election A
15,000.00 -
Election B
9,000.00
6,000.00
100% Payroll

18. Net Payroll – Example John starts August 1
John makes $100,000 annually
John elects single health, dental, and 5% 403B
John has TRS Tier II withheld
John is electing W-4 Single and 0
John is electing A-4 Single and 0

19. Net Payroll – Example John’s net pay without any relocation allowance

20. Net Disbursement – Example $15,000
AP Check
1st Full Payroll
2nd Full Payroll
Net Disbursed
Election A
15,000.00
2,223.97
19,447.94
Election B
9,000.00
4,768.09
5,062.55
18,830.64
100% Payroll -
13,768.09

21. Election A – John elects 100% AP
AP issues a check for $15,000 prior to the hire date. The total taxable payment of $15,000 is divided by 2 and paid in combination with the 1st and 2nd regular monthly payrolls. John is deducted the $7,500 from each payroll totaling the $15,000 previously paid through AP. John is paid and taxed on his regular payroll. The net is $2, His regular net payroll is $5,

22. Net Disbursement – Example $15,000
AP Check
1st Full Payroll
2nd Full Payroll
Net Disbursed
Election A
15,000.00
2,223.97
19,447.94
Election B
9,000.00
4,768.09
5,062.55
18,830.64
100% Payroll -
13,768.09

23. Election B – John elects 60/40 split
AP issues a check for $9,000 prior to the hire date. The total taxable payment of $15,000 is paid in combination with the regular monthly payroll. John is deducted the $9,000 previously paid through AP. John is paid and taxed on his regular payroll. The net is $4, His regular net payroll is $5,

24. Net Disbursement – Example $15,000
AP Check
1st Full Payroll
2nd Full Payroll
Net Disbursed
Election A
15,000.00
2,223.97
19,447.94
Election B
9,000.00
5,223.97
100% Payroll -
13,768.09
5,062.55
18,830.64

25. 100% Payroll– John is paid the relocation allowance after he is an employee
AP issues NO check. The total taxable payment of $15,000 is paid in combination with the regular monthly payroll. John is paid and taxed on his regular payroll. The net is $13, His regular net payroll is $5,

26. John’s net impact is 62% “bring home” Net Impact:
Each individuals impact to the net payroll will be different
However: 
The payment is federally taxable –Variable (around 25%)
The payment is state taxable – Variable (around 5%)
The payment is FICA taxable -7.65%
The payment is City taxable -1 %

27. Other Proposed Factors:
Relocation allowances are allowable to All Faculty, senior leaders through a search, and head coaches. 
Any other exempt position requires approval by Recruitment Services.   
Non-exempt employees are not allowed to be paid relocation allowances.   
All must sign the election form and the amount quoted in the hire letter.  
Relocation Allowances are not payable on a grant.  
UAB will not require nor ask for any receipts – the amount to be paid should be stated in the offer letter. 

28. Other Proposed factors
The payment is charged the CFB E rate no matter the disbursement path
Sign-On pay is charged the CFB E rate
If the payment amount is the same no matter the future employee’s home location then it might be Sign-On pay instead of Relocation Allowance. Sign-On pay is paid via Nonrecurring element by the department and paid through Payroll. The amount is required in the hire letter.
Sign-On pay is not allowable on a grant.

29. “On the Table” Procedure Plan
Provide Payroll Services with the Election form
Centrally we process the payments
Charge to non-grant funding sources on ACT form