IRS Tax Law Change
Beginning in 2018, an employee may no longer deduct personal moving expenses, nor can an employer pay or reimburse an employee’s personal moving expenses on a tax-free basis. However, the employer may continue to pay such moving expenses as taxable W-2 wages through Payroll.
Notes: This discussion does not include Lab moves. Lab moves are still University related expense and follow the historical procedure.
Prior to and after the 2018 tax law changes, house-hunting trips were taxable payments to the future employee. With the tax law change, UAB may now incorporate house hunting and moving allowances into the same package. In combination, we will refer to them together as Relocation Allowance.
UAB allows a future employee to access our contract pricing; however, the future employee is to make the actual payment to the vendor. Any exceptions for UAB to pay the vendor directly (under extreme circumstances), must be approved by the AVP- Financial Affairs. Direct payments from UAB to a vendor, does not change the taxability of the payment to the future employee.
Relocation Allowance payments to a dually-funded employee, should be made through the entity with the higher rate of pay.
- Ex – a dually-funded MD who earns $20k on a UAB assignment and $200k on an HSF assignment should receive their relocation allowance payment thru HSF.
Relocation Allowance Payments
Relocation Allowance payments are allowable for 01 Full-time Regular and 02 Full-time Temporary faculty, senior leaders through a search, head coaches, assistant coaches, and Athletics senior staff (Asst. AD and up).
- Any other exempt position requires approval by Recruitment Services.
- Relocation Allowance payments to non-exempt employees, are not allowed.
Approved Relocation Allowance Offer Letter Wording:
We agree to compensate you for relocation expenses in the amount of $________. In accordance with IRS regulations as well as UAB policies and procedures, UAB allows you to select one of two options on receiving your additional taxable compensation prior to your hire date and relocation. The election form is attached. If the relocation allowance is processed after your hire date then the taxable payment is processed through payroll.
Optional Statements: (to be included for additional allowances or lab moves)
· Any additional relocation allowance for unexpected expenses must be approved by your Dean/VP and will be paid through payroll.
· As approved by [Dean or VP], additional $______for ____ month(s) relocation allowance for temporary housing will be paid through payroll in combination with regular payroll and any other additional payments.
o With regard to moving any lab equipment or materials, you must follow all policies and procedures relating to such equipment and materials. If you have any questions regarding moving lab equipment or materials, you should contact UAB’s Occupational Health and Safety.
The UAB Relocation Allowance Election form is to be used when the Offer Letter only states the Approved Relocation Allowance Offer Letter Wording above. This allows the future employee to choose from the following two options:
Election A- Receive 100% of the payment up to two months prior to relocation through Accounts Payable (AP), or
Election B – Receive 60% through AP up to two months prior to relocation and 40% through Payroll.
Notes: These payments are taxable. Since AP payments are not W-2 reportable, the taxes and taxability have to occur once the employee is hired and active on the payroll. The AP payment would be recovered and the taxable payment processed through payroll.
Election A – the taxation would be divided between the first and second full payroll.
If not divided, you could easily take 100% of the pay.
Election B – the taxation will occur on the first regular payroll for the employee.
The signed election form and required attachments (W-9, Offer Letter) can be faxed (not emailed due to SSN on the W-9) to Payroll Services once an amount and relocation date is determined. Fax to Payroll Services (205)975-4739.
· Regular payroll is defined as a full rate of pay on the assignment relating to the move. This is indicated to avoid mid-pay period pays.
· If the hire date has passed, then the all relocation allowances are paid through payroll in combination with regular payroll.
· Relocation Allowances are not payable on a grant.
· UAB will not require nor ask for any receipts – the amount to be paid should be stated in the offer letter.
· The payment is charged the CFB E rate.
The Relocation Additional Allowance form is used when any Optional Statements are included in the Offer Letter. The timing of these one-time payments may be in combination with the predetermined allowance and cause further taxation.
Note: Additional payments require dean/VP approval (or delegate). Additional payments are paid through payroll in combination with regular payroll.