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-   -   Relocation allowance tax (https://britishexpats.com/forum/usa-57/relocation-allowance-tax-905891/)

mbox Nov 15th 2017 7:38 pm

Relocation allowance tax
 
Hi,

I'm in the process of relocating back to the US via an inter-company transfer. My official start date/move to US payroll is January 1st. I will be going to the US in December and will spend time getting a house etc. Next week the company is transferring a relocation allowance lump sum into my US bank account and they've said that it will be taxed at source before it's paid to me.

I'm a bit confused as to how exactly they will tax this at source. How will they calculate the rate of tax? Will they also deduct Social and Medicare? Does this mean that I'll effectively be on the payroll from next week meaning I'll need to submit a US tax return for 2017?

Any advice is greatly appreciated.

Thanks!

SanDiegogirl Nov 15th 2017 8:11 pm

Re: Relocation allowance tax
 
They'll deduct tax starting with your first pay check in January I would expect.

Yes, they will deduct Social Security and Medicare payments.

Cook_County Nov 16th 2017 6:49 am

Re: Relocation allowance tax
 
Why did you not negotiate that it should be grossed up?

mbox Nov 16th 2017 11:19 am

Re: Relocation allowance tax
 
They've spent a lot and it seemed a step too far!

I still don't really get why I need to submit a tax return and pay medicare/social etc. when my end date in the UK isn't until December 31st and my start date is January 1st. It's not like I've been in the country and benefiting from anything.

MidAtlantic Nov 16th 2017 11:39 am

Re: Relocation allowance tax
 

Originally Posted by mbox (Post 12383371)
They've spent a lot and it seemed a step too far!

I still don't really get why I need to submit a tax return and pay medicare/social etc. when my end date in the UK isn't until December 31st and my start date is January 1st. It's not like I've been in the country and benefiting from anything.

There are many things in the US tax code which you will never ever "get", including the utter bureaucratic nightmare of doing an annual tax return.

yellowroom Nov 16th 2017 11:54 am

Re: Relocation allowance tax
 

Originally Posted by mbox (Post 12383371)
They've spent a lot and it seemed a step too far!

is that what they said to you, or is that British reserve on your part? If the latter, then you need to get tough and go and ask! What maybe considered pushy behaviour in the UK is normal in the US, and it won't be held against you if you ask, in an assertive and professional manner.


Originally Posted by mbox (Post 12383371)
I still don't really get why I need to submit a tax return and pay medicare/social etc. when my end date in the UK isn't until December 31st and my start date is January 1st. It's not like I've been in the country and benefiting from anything.

Short answer, because it's income and the governments on both sides of the Atlantic tax people's income.

Long answer - I hope as part of your relocation your company is offering assistance with tax returns (in both countries for transition years)!

petitefrancaise Nov 16th 2017 2:33 pm

Re: Relocation allowance tax
 
+1 for asking it to be grossed up. They may well be waiting for you to ask for it. Don't ask, don't get and in the grand scheme of the costs of relocating, it isn't a huge amount but it will make a difference to you.

Rete Nov 16th 2017 3:31 pm

Re: Relocation allowance tax
 

Originally Posted by mbox (Post 12383371)
They've spent a lot and it seemed a step too far!

I still don't really get why I need to submit a tax return and pay medicare/social etc. when my end date in the UK isn't until December 31st and my start date is January 1st. It's not like I've been in the country and benefiting from anything.

If your effective employment tax is January 1, 2018, then you will be here in the US at some point in mid to late December to setup your household. In anticipation of that, your company is giving your relocation allowance before your first physical working date. It makes sense since you will be using those funds before January 1. Are you 100% sure that "at source" is the US and not the UK. You can look at it that "at source" is the UK as that is where the money is coming from. Ask them about it.

BigK Nov 16th 2017 7:18 pm

Re: Relocation allowance tax
 

Originally Posted by mbox (Post 12382994)
Hi,

I'm in the process of relocating back to the US via an inter-company transfer. My official start date/move to US payroll is January 1st. I will be going to the US in December and will spend time getting a house etc. Next week the company is transferring a relocation allowance lump sum into my US bank account and they've said that it will be taxed at source before it's paid to me.

I'm a bit confused as to how exactly they will tax this at source. How will they calculate the rate of tax? Will they also deduct Social and Medicare? Does this mean that I'll effectively be on the payroll from next week meaning I'll need to submit a US tax return for 2017?

Any advice is greatly appreciated.

Thanks!

Why wouldn't they just treat this as a straight expense? Why treat it like salary? Makes no sense

petitefrancaise Nov 16th 2017 7:25 pm

Re: Relocation allowance tax
 

Originally Posted by BigK (Post 12383744)
Why wouldn't they just treat this as a straight expense? Why treat it like salary? Makes no sense

Because it's a taxable benefit. They are paying it to him for him to spend (or not) as he wishes.

BigK Nov 16th 2017 7:27 pm

Re: Relocation allowance tax
 

Originally Posted by petitefrancaise (Post 12383753)
Because it's a taxable benefit. They are paying it to him for him to spend (or not) as he wishes.

I see, its more like a bonus than actual expenses for relocation. Then that makes sense


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