Marc_ely

We are coming over to California in January (H1B visa grant permitting).
The company I am going out to work for is offering a $25k relocation assist and I am free to spend that as required.

But from what I have read here - if they transfer this directly to me to spend the IRS will see this as a "bonus" and it will count as taxable income. Even if I keep receipts etc I am not sure I will be able to avoid that and reclaim taxes etc?

So instead am I better to get the company to directly pay some of the costs?
The big ones being:
Removals $9400
Flights $2880
PetTransfer $1920
Car Hire $300

This will leave me with only $10k or so which will at least lead to less tax should I have to incur it.

PS I have searched and searched the forum and found lots of useful snippets of information on Relocation Payments but I can't quite find the answers in black and white so apologies if this has come up in another thread.

Pulaski

It is common for companies paying relocation to "gross up" the payment, knowing that it is taxable. It sounds to me like your employer doesn't want to be färting around with your shipping invoices, so they're bunging you $25k. You can ask them to pay your invoices directly, but I doubt they will do so.

civilservant

This attracted my attention. How are you coming over in January on an H1B? That seems outside the normal timescales, unless it's one of the non-cap positions.

Marc_ely

Thanks for the info.
The company has offered to pay individual expenses for me. So I think I will go with that.

The H1B has been approved but I still have the visa interview in a couple of weeks time. My job start date is January.

civilservant

That explains that then

celticgrid

Even if they pay the bills directly it is likely that, sooner or later, it will go through the payroll system. My relocation expenses were mainly paid directly - the big bills, as you are thinking - but it all ended up as items on the payslip. In my case they grossed it up to allow for taxes, so not an issue. I'd check that they will gross things up so you come out level on the tax situation.

Bink

$9,800 seems kinda high for removals. Are you shipping a full 40ft container worth?

I'd take the cash. Then there will be no issues with being reimbursed.

When you file your taxes make sure to include your moving expenses as certain items can be deducted from your gross income to reduce your taxable gross income. The items that are tax deductible are: your travel expenses (flights), shipping costs, first nights accommodation.

See here: http://www.irs.gov/publications/p521/ar02.html

Is the company paying for a tax professional? I would make sure they are and would seek their advice in order to maximize your tax reductions.

Zez

We had expenses paid and were given $3500 which they grossed up. Agree your moving costs sound high; we did a 4 bed house for $5000.

Good luck with the move x

Marc_ely

Thanks for all the comments.

For the record the removals are Pickfords (who are the same price as the others we've spoken to).
It's a 20' container and is £5400 door-to-door including taxes.
You then need insurance and totting up our goods we think £500 is reasonable (about 18k covered).
Add those and convert and you get $9400 ($9800 was my quick and dirty estimate).

md95065

Yes, it almost certainly will and, even if it doesn't, it is still taxable.

Hotscot

Can you sell most of your stuff in advance?
Save shipping costs then you have the dosh for shopping.
Shopping for new stuff here will be fun.

Hawkini

+1 - My wife had LOADS of fun with a bundle of cash getting new furniture and beds (we realized new bedding would be useless, so we sold all of our beds).

I then had a bundle of fun gettings a new Amp, assorted TVs, speakers and Xbox etc. 2 days before we left the UK I went to a carboot with everything we hadn't sold and ended up with 500 quid - you'd be surprised what people buy.

Trixie_b

http://www.irs.gov/taxtopics/tc455.html

Here's some reading for you!

angelman

When I moved I had about $20k relocation budget. I was told I could spend it on a single ONE way air fare, or moving expenses and I think that was tax free. Anything else I spent it on would be taxed at something crazy like 40%. I figured that although it was a generous offer I wouldn't go nuts buying stuff I wouldn't normally because I would still be paying 40% of the value of it as taxes.
Since I did not have any moving expenses I just blew almost the whole lot on a business class airfare. I was going to go 1st class but the company warned me they would cover reasonable expenses and that 1st class might not be considered reasonable (at least for my relatively lowly position at the time).

Pulaski

You idiot. They gave you $12,000, to do with as you pleased, and $8,000 to pass on to the IRS. To avoid giving $8,000 to the IRS, you blew the lot! That is a text book case of why taking decisions primarily to save tax is not sensible!