Grossing Up of Relocation Expenses

6343097

Looking to benchmark what other companies do regarding "grossing up" of relocation costs for international transfers (for tax purposes).  Even though they can write off relocation expenses, we have been experiencing individuals that are taking a loss because income tax on transfers. Our company board will not pay for the expenses directly.  Would like to know - does your company gross up the amounts?  If so, how much?  If not, any creative ways that any companies are addressing this.

Kathi Greenwell

We gross up out-of-pocket expenses by 28% to help offset the tax.

kldrake

yes, we gross up at a rate of about 30%.

ddomian

Grossing up at the effective federal rate may not be enough.  If you have a highly compensated executive who is alreayd at a high tax bracket, the 28-30% quoted by others may not be enough.  In addition, the relocation could place people into another bracket causing their payroll taxes to be higher.  If you work with a relocation company, they can provide some good guidance on how to gross up.  If you aren't working with a relocation company, you may want to look into it, as it usually costs the company little to nothing.  The relocation company gets their money from the referral fee from the realtors.

gpagett

Typically companies work with an accounting firm to handle international relocation tax issues for employees. Your accounting firm should be able to advise you how to handle the matter fairly for the employee and company and if there is a need to gross up any of the expenses.