What is an RTR?
Each year in January Bristol Global Mobility issues a Relocation Tax Report (RTR) to our clients’ U.S. relocating transferees for whom Bristol calculated tax assistance. We are pleased to notify you that as of January 31st all RTRs are now available to 2020 transferees through the secure BristolElite portal, and personal emails have been sent to all transferees advising them of that fact. We highly recommend transferees collect this document and consult a tax advisor to assist them in filing their tax returns in order to ensure compliance and accuracy.
Most expenses reimbursed under company relocation policies are considered taxable income by the Internal Revenue Service (IRS). All such expenses are included on the transferee’s 2020 W-2 as part of their taxable wages (in Box 1). This is true whether the expenses are reimbursed to the transferee directly or paid to a 3rd party (such as a van line) for services on their behalf. The Relocation Tax Report details relocation expenses paid/provided to the transferee during 2020 as well as any gross-up amount paid on their behalf to offset the tax implications. (The RTR is for informational purposes and is not required to be submitted with their tax filings.)
2020 Tax Updates
State Taxes: There are seven states - Arkansas, California, Hawaii, Massachusetts, New Jersey, New York, and Pennsylvania - that still allow for a deduction of household goods and final move. Bristol has automatically accounted for these and you may rest assured that undue tax assistance has not been calculated on these expenses for those seven states.
COVID-19 “Disaster” Relief: On March 13, 2020 the President declared the Covid pandemic a national disaster putting code Section 139 into place. This allowed certain relocation expenses due to Covid, such as temporary living extensions, longer household goods storage, and increased home purchase costs to become nontaxable and employers also avoid extra gross up costs. This was effective until December 31, 2020.
I moved in late 2019. Why am I getting a 2020 RTR? Expenses may have been incurred in the latter part of 2019 that were not received until after the client cutoff date. These expenses even could have been paid out in 2019, however, if the documentation was not accounted for in 2019 they would fall under the client’s 2020 tax year.
I moved more than once in 2020. Are all moves included on a single RTR? No, if moving expenses for more than one relocation were paid to the employee or on their behalf in the same tax year, a separate RTR is provided for each move.
My relocation was tax-assisted. Will I receive a check for the tax assistance amount? No, the amount of tax assistance provided on your behalf is reported to your employer’s payroll department. This dollar amount is then used by your employer to pay taxes directly to the applicable tax authorities and is reflected as additional tax withholding on your W2.
What is “tax on tax”? This refers to the phenomenon (often referred to as “circular logic”) that tax assistance is itself taxable income to the employee, and most employers will provide additional tax assistance on it! It is embedded in the calculation.
Who should I contact if I have any questions? Please reach out to your Bristol Client Engagement Director or firstname.lastname@example.org
We thank Amber Vitale, Bristol's Manager of Client Financial Services for writing this timely and informative article!