2013 Global Relocation Conference: Payback Agreements – How to Collect and Tax Concerns

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Finance

Published on March 13, 2014

Author: Orion_Mobility

Source: slideshare.net

Description

Presentation and slides from 2013 Global Relocation Conference by Quentin Hormel.

Payback Agreements – How to Collect and Tax Concerns

• Taxables, excludables, and business expenses. • Third-party homesale expenses? • Executive paybacks and Sarbanes-Oxley? Paybacks do not create a “loan”. • Payback applied proportionately among expenses.

• $10,000 excludables • $1,000 box 12-p excludables • $15,000 taxables • $14,000 third party homesale costs • $40,000 total expenses • $20,000 payback (50% of total expenses)

• $5,000 excludables (50% of $10,000) • $500 box 12-p excludables (50% of $1,000) • $7,500 taxables (50% x $15,000) • $7,000 third party homesale costs (50% x $14,000) • $20,000 payback (50% of total expenses)

• W-2c for year of original reimbursement. • Do not touch boxes 1-2 on W-2c. • Only adjust boxes 3-6 on W-2c. • Company should refund SS & Med overpayments and obtain signed affidavit from employee. • Report adjustment on 941-X or 944-X to recover SS and Med taxes.

$7,500 taxables (50% x $15,000) W-2c: • Total Medicare Wages (Boxes 3 & 5) -$8,121.28 ($7,500 + SS/Med W/H) • Soc. Sec. Withholding (Box 4) -$503.52 ($8,121.28 x 6.2%) • Medicare Withholding (Box 6) -$117.76 ($8,121.28 x 1.45%)-

• Employee should not file an amended tax return. • On current year’s return, an itemized deduction on the Schedule A to retrieve Federal withholding, subject to 2% floor. • Best not to give guidance to employees – “consult tax advisor”.

• Apply adjustments to all earning and withholding boxes for the current year. • “Wage-offset method” should be followed, not “claim-of-right method”.

• IRS Publication 525 (page 33 of 2012 edition) and Publication 17 (pages 83 & 200 of 2012 edition). • IRS Publication 15 – Circular E (page 34 of 2013 edition). • Revenue Rulings 67-48 and 79-311. • Private Letter Rulings 9050053 and 9313015.

Thank You! For more on Tax, Relocation, Legal and Payroll visit our blog at: Blog.orionmobility.com Follow us on Twitter @Orion_Mobility For more visit our website: www.orionmobility.com

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