Page 151 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
Moving Expenses
Employers may ask employees to move to a different company location.
If the employer pays a third party or reimburses the moving employee
for actual costs incurred, there is no reportable income to the employee.

This applies only if the employee’s new workplace is at least 50 miles
further from his or her residence than the former workplace; and the
employee must work out of the new location for at least 39 weeks dur-
ing the 12-month period following the move. Otherwise, the move
transaction will have the appearance of being a simple compensation by
the employer to the employee, who uses the funds to move to a new
location while still working at the same place.
If the employer pays the employee a fixed amount to complete the
move, and if the actual expenses incurred are less than the payment,

then the difference is reported as income to the employee.
Example. The Fragrant Perfume Company asks its lead software
developer to move to New York City,where she can create a new logis-
tics system for herbs being shipped through the New York port facili-
ties. The new location is 250 miles away from her previous position at
company headquarters.The company pays her $20,000 to complete the
move, against which she can substantiate incurred expenses of $16,000.

The difference of $4,000 is gross income, from which the company
must deduct payroll taxes.

Outplacement Services
An employer may offer resumé assistance, counseling, and other outplace-
ment services to employees it has terminated.The value of these services
is not recorded as income for the affected employees, unless the employer
receives a substantial business benefit from providing the services and the

services would have been reimbursable business expenses to the employees

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