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By Mike Sheridan,
article
courtesy of homestore.com & realtor.com
You've done it. You've packed your belongings, said goodbye to friends and neighbors, moved to a new home and started your new job. So the hard work is done, right?
Not quite. There's an important item remaining: settling up with Uncle Sam.
U.S. and state tax codes are full of complicated rules, regulations and nuances that affect relocating individuals. With April 15 around the corner, it's important to obtain authoritative advice about the tax implications of moving expenses and determine how an employer's relocation disbursement can affect your income and deductible expenses.
Moving is big business: Relocation has become big business, with an estimated 40 million Americans moving every year. Increasingly, corporations are turning to tax relocation specialists because there are so many questions and subtleties involved.
For instance, if your employer provides you with a lump sum of $10,000 to cover moving costs, that amount is taxable and typically added to the individual's gross income.
Such reimbursement can place you in a higher tax bracket, says Robert Petty, director of marketing at ReloTax, (a subsidiary of Homestore.com) a financial services company. "Even relatively small errors in income tax preparation can distort gross income dramatically."
What can you write off? Deductible moving expenses can be tricky. For instance, transporting a second car or a boat could be deductible, as could expenses such as utility hook-up fees and mileage and lodging costs. It's areas like these where a tax relocation specialist can really help you.
"A local CPA firm usually isn't well versed in interstate relocation and could inadvertently take deductions that are incorrect and conceivably earmark an individual for an audit because of mistakes," explains Debbie Gioiella, director of operations at ReloTax. "That's why more and more companies are hiring professionals to work with their relocated employees."
A spokesman for one firm that uses ReloTax calls it "one of the best decisions we ever made. The company is familiar with our relocation policy and ReloTax professionals are knowledgeable with the tax laws of all states and localities. The result is we have satisfied transferred employees who can concentrate on their work and not be distracted by complexities of preparing a tax return complicated by a relocation."
One reason for this is ReloTax utilizes software that can compute multi-state taxation. "We point out all the deductions available, says Gioiella," so we have a better knowledge of what expenses can be deducted and what are the ramifications that affect each state."
More importantly, it brings tax closure to the financial aspects of the relocation process, Petty says. "It enables individuals to get on with their new job—and their new life." |
