N1cky

Hi
Hoping someone out there can help me with this. We moved to LA at the end of November 2007 with L1 visas for an international relocation.

The company organized and paid directly for all flights, accommodation, removal costs. We paid for some temporary accommodation and a few bits here and there. The costs showed on my husbands W2 this tax year, they were all in Box 1 under Salaries and Wages, and despite asking for a breakdown of the costs we still haven't received them. Instead they have set up a meeting with Deloitte for us to do our return.

From what I have read on IRS, the relocation costs should have been broken down and provided to us, and should appear in Box 12 of his W2.

Currently without putting the moving costs in we are left with a tax bill in excess of $7k so really need to sort this out.

Can anyone offer any advise, and also confirm that the Moving Expenses guide on IRS applies to international moves? Also does it look to anyone else that his W2 is incorrect?

Many Thanks

MsElui

we came over in 2007 so had to do this last year.

We received some expenses as cash - for us to spend as we wanted and the company paid for some directly (like flights removals firm etc). The cash sums were tax protected - so whilst we ended up with a tax bill for them as we recieved a cahs benefit - the company worked out how much tax they had to pay to compensate us so we receieved the gross value. The company provided accountant did the tax return and a seperate sheet saying how much money the company would pay - so we still ended up with a tax refund.

check if your expenses were 'protected'

N1cky

Thanks for this. The company never paid us anything for the cash expenses, we are out of pocket on them.

Do you remember how they displayed the expenses they paid for on the W2?

rebs

We moved to the US last year with a similar arrangement to MsElui. My husband's employer paid for some expenses directly (removal firm, relocation services, flights to take up the assignment). On top of that, we received a cash sum to pay for anything else (househunting trip, deposit for rental, car deposit etc etc).

On the W2, only the cost of the flights to take up the assignment are shown in box 12. All the other costs, both direct cash to us and paid to suppliers are shown as wages and salary.

As MsElui said, for us this is 'protected'. In addition to the W2, the employer provided the accountant with a breakdown of the relocation costs. The accountants have then worked out the tax liability on the portion of income that relates to relocation costs.

OH's employer will reimburse us that tax liability.

Interestingly, when they give us that money, that in itself is liable to tax! Next year and each year, we'll have to do the same again with the employer reimbursing ever smaller sums of money!

N1cky

'cor its all too complicated for my little brain. I'm just hoping this guy from Deloitte knows what he is doing and we don't end up with a huge bill.

Sorry if I am being thick, are you both saying that the employer pays your tax liability on your relocation costs if they were 'protected'?

I certainly never saw anything about that when we signed the stuff, but it happened so quickly I could have missed it. Time to dig the contract out again I guess.

N1cky

We finally received the breakdown from the company and its all tax protected except for the air fares and shipment of household goods. So hopefully won't end up with a huge bill after all

MsElui

you only have to worry about the ones that were paid direct to you being 'protected'. Anything the compoany paid for directly doesnt affect your tax bill.

N1cky

Its all going wrong. We finally got our tax return back from the accountants that the company provided, only to be told we owe $5k. We didn't pay anything direct, the company paid for it all and everything. Strangely enough the tax we owe is very similar to the amount that appears in the W-2 as Tax Protection

We can't get any answers from the accountant or the company, the accountants have filed for an extension for us but I'm now really stressing out about this huge bill.

Any tax experts out there who can come to my aid?

MsElui

we had a tax bill too if i remember correctly - but the company then had to pay us more than the tax bill to us to cover it and that extra was our refund. (ie our refund was initially negated by the excess bill). Check whether the company still needs to make a payment to you. (i can remember thinking omg - tax bill the same as you - last year)

N1cky

Thanks MsElui, at the moment we can't get them to answer a simple email let alone cut a check for $5k. If we have to get it back from them then I think we have had it.

rebs

Ours worked that way as well this year - we had to pay the IRS an amount, and then OH's company paid us in excess of the tax payment that we made. Ultimately we were in pocket, but as far as the IRS is concerned we made a payment!

N1cky

Thanks for this. We are paying what we have been told we owe today along with filing our extension. The company are looking into it so hopefully we will get it paid back. Thanks for letting me know i'm not the only one.

MsElui

might be worth asking the accountants about the 'protected status' bit. Ie have they set the details to the company (who are going through a slow payment of expenses procedure?) the accountants sent a summary to my husbands firm with a calculation of what they were due to pay. a few days later (both years) we recieved the expenses via payroll.

N1cky

Yes, apparantly they have sent it to the expat department, it might have been helpful if we had known about this dept 3 months ago, saved us lots of stress and hassle.

So keeping our fingers crossed.

MsElui

i agree - they just assume you will understand but when you think you have a large tax bill that you were not expecting its a shocker!