Alan L. Sklover - Sklover Working Wisdom

What is the meaning of . . .

“Gross Up”?

Everyone is legally permitted to try to avoid taxes – I did not say “evade” taxes – or to pay as little as permissible, in any legal way available to them.

For employees, the most common opportunity to do so is when they incur work-related expenses that may require them to pay taxes on some of the reimbursement.

Examples may include (a) relocation reimbursement, which is now fully taxable to the employee, (b) educational reimbursement that may be partially or fully taxable to the employee, (c) entertainment or travel reimbursement that may be partially or fully taxable to the employee, especially if in excess of certain allowable limits, and (d) automobile expenses.

So, for example, if an employee is asked to move his or her residence for a year or two from Boston to Belgium, moving expenses (for themselves and their family) is considered non-deductible for them, and if the employer reimburses them for that expense, all of the reimbursement is considered income to the employee, who must pay tax on it.

Here’s another example: if your employer asks you to take courses to enhance your work skills, and the cost in one year exceeds $5,200, the excess amount, if reimbursed by your employer, is considered income to you, and you must pay tax on it. There are many other real-life examples, too.

So what’s the solution? Ask your employer to not only reimburse you for the actual expense, but to also pay you the amount you will have to pay in tax on that reimbursement. That is called “Gross Up” for tax purposes, or “Tax Gross Up.”

While it takes a little “gymnastic arithmetic” to figure out exactly how much “Gross Up” payment to you is needed to precisely “Gross Up” tax that you will have to pay, that calculation can be done by your employer, its payroll service, or your own tax advisor.

The reason that it is a bit complicated to calculate “Tax Gross Up” is that the employer should not only (a) pay the additional tax due by the employee, but (b) should also repay the employee for the new tax to be due on the original reimbursement amount, as well.

As an illustration, if the employee incurs a relocation expense of $1,000, and the employer reimburses the employee the $1,000, the employee may have to pay income tax on the $1,000 received of about $300. But wait a minute: then the employee has to pay tax on that $300, as well, which might come to yet more income tax of $90. So, the employer should also “Tax Gross Up” that amount, too. (I told you it was a bit complicated.)

So, whenever a work-related reimbursement is taxable to you as income, or you believe it may be, ask for “Gross Up” for tax purposes, or “Tax Gross Up” as it is also commonly called.

If you do so, there will be more money in your pocket after tax time, and, hey, there’s nothing wrong with that!!

Be aware. Be alert. Look before you leap. That is to say, be “SkloverWorkWise.” You will be VERY GLAD you did.

Incidentally, we offer a Model Memo titled “Request for Tax Gross Up” to send to your employer. Like all of our Model Memos and Letters, it shows you “What to Say . . . and How to Say It.”™ To get yours, [click here.] Delivered in minutes to you by email.

(Please note: This email newsletter does not constitute legal or tax advice; for such advice or counsel, you need to consult a lawyer or tax adviser. In addition, laws change, and that may include the present tax treatments noted above, and, so, reliance upon this email newsletter must take these warnings into account.)

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

“Your Path to Dignity at Work”™

© 2019 Alan L. Sklover All Rights Reserved and Strictly Enforced.

“Ability may get you to the top, but it takes character to keep you there.”

– Stevie Wonder

First of all, Stevie Wonder is, for me, one of the true Wonders of the World. There is something nearly beyond human in his music and lyrics. Last week I listened to a podcast about music. Someone mentioned that Stevie Wonder had agreed to appear at a charitable event for a small charity, and to do one song. The charity was more than thrilled. He arrived, practiced with their band, but instead of one take, he insisted on practicing that one song with them for three hours. About 20 takes. If he was going to do it, well, he was going to do it right. Even for a small charity. That, my friends, is why he is at the top, and why he has been there for so long . . . true character. A true Wonder of the World. (He makes me dance, especially when no one is looking.)

This quote was submitted by my son, Sam, who is a musician, employed in the music industry, and – like me – a very big Stevie fan. Thanks, Sam, for your contribution, and Thank You, too, for being the young man of character you are.

If you would like to contribute a saying, proverb or quote, we’d love to receive it and share it with our Blog Family. To do so, just send it to “The Boss,” Vanessa@ExecutiveLaw.com.

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

SkloverWorkingWisdom.com – Your Path to Dignity at Work™

© 2019 Alan L. Sklover. All Rights Reserved and Strictly Enforced.

Question: My employer was purchased by a competitor, and a large group of us were chosen for layoff. As part of the severance offer, I have to sign an agreement. One of the sections of the severance agreement has the title “No Re-Hire; No Application.”

It says that I will never again “seek to regain employment by the Company or any company that is affiliated with the Company.”

I haven’t done anything to deserve this, and so I am wondering why they would take that attitude toward me. It’s bad enough to lose a job, but this seems insulting. Have you ever seen this before?

Fiona
Elgin, Illinois

Answer: Dear Fiona: This is not the first time I’ve received almost this exact question. It seems like more of a kick in the pants than a reasonably gentle “goodbye.” Hopefully my explanation shines a bit more light on the otherwise troubling clause.
Continue Reading. . .

“So much has been given to me, I have no time to ponder what has been denied.”

– Helen Keller

Helen Keller was left blind and deaf by an illness at age two. Yet, she became the first blind-deaf person to graduate from college, and then went onward to become a world famous author, activist and lecturer. As her words attest, she focused on the positive, appreciated all of her blessings, and never wasted a moment to self-pity. An inspiration like few others; an example for us all.

This quote was submitted to us by Michele D., a long-term member of our Blog Family, whose most recent contribution, above, she uses in her daily endeavors as a training professional. Our heartfelt thanks go out to you, Michele!

If you would like to contribute a saying, proverb or quote, we’d love to receive it and share it with our Blog Family. To do so, just send it to “The Boss,” Vanessa@ExecutiveLaw.com.

Need a model memo or letter to transmit a request or complaint? A good checklist or form agreement? For a complete list of our Model Letters, Memos, Checklists and Sample Agreements, Just [click here.]

Interested in Membership? It’s free, and has advantages, including discounts on our products. Just [click here.]

Need a private telephone consultation? Just [click here.] Evenings and weekends can usually be accommodated.

© 2019 Alan L. Sklover. All Rights Reserved and Strictly Enforced.

“God could not be everywhere and
therefore he invented mothers.”

– Jewish Saying

To every mother, grandmother, and great grand-mother out there, THANKS. Today is Your Day. It’s even named after you. In case anyone hasn’t said it to you yet, THANKS for all you do, all you’ve done, and for the zillions of things you will do tomorrow and the day after that, too . . .

© 2019 Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.