ALERT: COVID-related relocation payments are non-taxable
We trust you are taking good care of yourselves, your loved ones, and your businesses with vigor and courage during this challenging time. Rest assured Bristol is doing the same. We are honored to partner with you.
While we focus on increasing our support and compassion towards your mobile employees we are also sifting through the torrents of information that are coming at us daily, committed to bringing you the most important and actionable information that affects YOUR mobility program.
Today we note some important tax developments with implications for mobility that came into focus this week:
COVID-related relocation payments are Non-Taxable. In declaring a national emergency on March 13th President Trump triggered Section 139 of the Internal Revenue code with its provisions permitting employers to make disaster relief payments tax-free to qualified employees. The Mobility industry interprets the COVID-19 pandemic to be such a disaster and any benefit you may be extending to your transferees as a direct result of COVID-19 will be tax-free. This is in contrast to their normal taxable (and usually grossed-up) status.
Such payments may include, for example, work-from-home expenses like home office equipment, utility and internet expenses; extended Temporary lodging (e.g. for employees in mid-relocation or stranded overseas); extra food and lodging expenses; air tickets home or to an alternate destination; extra home purchase costs; child care due to school closings and much more. In short, any payment that wouldn’t have otherwise been made under prior conditions. The IRS is expected to be quite liberal in its interpretations, substantiation requirements and limits on the amount or duration of such payments.
Bristol would like to ensure that our clients take full advantage of this opportunity while being quick, accurate and compliant. We recommend beginning the process of strategic tracking, classification and reporting of such payments starting now. Your Bristol Account Director will be reaching out to you shortly to discuss your company’s overall intent, reporting needs, answer any questions you may have and work to identify each specific employee and types of payments that may fall into this classification.
A Creative strategy: Student Loan relief
Section 2206 of the CARES Act allows employers to make payments on student loans for employees, up to $5,250 per year, and exclude those payments from the employees’ incomes. This provision provides another means for you to provide tax-exempt relief for certain employees financially impacted by COVID-19.
For a fuller run-down of relevant CARES act issues, please see:
Stimulus Payments – Tax Protect?
The (initial) $2+ trillion congressional relief package contains provisions to provide direct relief in the form of an advance tax credit to most Americans.
The relief payments are $1,200 per adult ($2,400 for married couples), plus $500 for every child under the age of 17. However, full payments are limited to individuals with adjusted gross income less than $75,000 and married couples with adjusted gross income less than $150,000. The payments then phase out to zero over income levels up to $99,000 and $198,000.
This may present a challenging question for those employees whose 2018/2019 relocation benefits carried their income above the phase-out thresholds, and companies will need to take a position on whether they will take steps to equalize or “keep whole” any such transferees. Competitive practice / consensus on the approach is still developing but it appears most companies are strongly considering offering true-up payments.
More details here: https://www.worldwideerc.org/news/mobile-employees-may-be-affected-by-relief-checks-calculation
Let’s stay Connected!
Should you have a question relating to a specific move, assignee, country or service, please contact your Account Director for the latest update and specific guidance. In any case, we will talk to you shortly.
Recommended additional resources:
Mobility industry updates:
Worldwide ERC: https://www.worldwideerc.org/coronavirus
Canada ERC: https://www.cerc.ca/page/COVID-19-Resources
Health and Safety:
World Health Organization (WHO): https://www.who.int/
U.S. Centers for Disease Control (CDC): https://www.cdc.gov/coronavirus/2019-ncov/prepare/index.html
Health Canada: https://www.canada.ca/en/health-canada.html