. . . Yes, the 2018 “Tax Reform” law in the U.S. made employer-paid and employer-reimbursed relocation costs – even when your moving is requested by the employer – income to the employee, and thus taxed to the employee? Yikes!

We all should know that wages, salary, bonuses and employer-granted grants of stock are “income” to the employee, and thus subject to taxes to be paid by the employee.

Some of that changed in the U.S. this year due to our “friends” in Congress, and their so-called “Tax Reform” law that lowered taxes on the wealthy.

Under previous tax law, payment OR reimbursement of most of an employee’s job-related moving expenses were not subject to income taxes or employment taxes (such as Medicare or Social Security.)

However, under last year’s so-called “tax reform” legislation, employers now must include all moving expenses – whether paid by the employer OR reimbursed by the employer – in the employee’s income that they report annually to the IRS.

Employees are warned to take this change into account when considering whether to accept a relocation request, as moving oneself, or an entire family, can be awfully expensive, and doubly so when the amount paid or reimbursed by the employer is also subject to taxes.

You may want to request that your employer (or prospective employer) not only pay for or reimburse you for your relocation costs, but also agree to “Gross Up” that amount that is, also pay you what you will need to pay in taxes, to make up that “tax difference” to you. Alternatively, to “repay” you in some way to address this new tax burden on you.

If you are not familiar with the concept of “Tax Gross Up,” look for our upcoming newsletter to be entitled “Tax Gross Up: What Does That Mean?”

“Knowledge is leverage. Forewarned is forearmed. Look before you leap.” That’s our motto at SkloverWorkingWisdom.com.

[Written and transmitted May 8, 2019.]

(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 includes the present tax law noted above, and, so, reliance upon this email newsletter must take these warnings into account.)

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

 
“Whoever is careless with the truth in small matters
cannot be trusted with important matters.”

– Albert Einstein

ACTUAL CASE HISTORIES: Case History 1: Joseph signed an Offer Letter that said the following: “The Company will provide you and your family with health insurance coverage, subject to the terms provisions and conditions of the Company Health Insurance Plan.” Sounded good to Joseph.

After starting the job, though, Joseph found out that the terms of the Company Health Insurance Plan provided that “New employees and their families are not eligible for paid health insurance coverage until the employee has been on the job for six months.” So, the “terms and provisions” of the Plan essentially took away what the Offer Letter had seemed to provide Joseph and his family. Big disappointment, to say the least. In this case history, the Plan “overcame” or “superseded” what was in Joseph’s Offer Letter, or at least modified it to his and his family’s significant detriment. Ouch!

Case History 2: When Lemuel started his job, he was very interested in the company’s willingness to offer stock options to its employees. For this reason, he carefully reviewed the terms of his employer’s Stock Option Plan. It said quite clearly that “Company employees will receive a minimum of 1,000 stock options for each twelve months on the job, unless agreed otherwise.” Sounded great to Lemuel.

After a year on the job, Lemuel asked his Human Resources representative if he could get a written statement of how many stock options he had been awarded. To his surprise, he was told “You don’t have any.” When Lemuel insisted on an explanation, she responded, “Your Offer Letter stated clearly ‘Your compensation consists of a base salary, an annual bonus and health care coverage. No other compensation is being offered to you. To receive any additional form of compensation, you and an authorized representative of the Company and you must sign another document that provides that to you.”

So, the “terms and provisions” of Lemuel’s Offer Letter essentially took away what the Stock Option Plan had seemed to provide Lemuel and his family. In this case history, the Offer Letter “overcame” or “superseded” the Company’s Stock Option Plan. Ouch! Big disappointment, to say the least. Seems that the Offer Letter took away what the Stock Option Plan seemed to provide, by “overcoming” or “superseding” what was in the company’s Stock Option Plan.

Does your Offer Letter (or employment agreement) overcome everything that is said in any of the employer’s compensation and benefit Plans? Or do your employer’s compensation and benefit Plans overcome your Offer Letter (or employment agreement)? How can you tell? Perhaps, more importantly, what can you do?

LESSON TO LEARN: If they differ, which one – your offer letter or your employer’s plans – “govern and control?” It all depends, of course, on the wording of the documents – both offer letter and plan – and your willingness to take the time and effort to (a) read them carefully, and (b) ask for clarification, either on your own or, perhaps, with the guidance of an experienced employment attorney.

These days, with employers trying their very best to lower their “employment-related overhead costs,” we are seeing more and more of these issues, and sadly, most often only after someone has lost out on what they deserve.

But you can protect yourself, if only you are willing to try to do so by (i) reading carefully, (ii) thinking carefully and (iii) requesting clarification that even a 10-year old could understand.

That’s what we call wise “navigation and negotiation” of your employment relation, to ensure you get all you deserve, and don’t miss out on anything you do deserve.

Take it from me: unless you act to protect yourself, no one else will, especially your employer.

WHAT YOU CAN DO: Have you received an offer letter, or are you expecting to receive one soon? Do you believe you are entitled to any compensation or benefit that is provided under a company Plan, such as stock, stock options, severance, health care, disability insurance, life insurance, educational benefits, or otherwise? To avoid being deeply disappointed, here are seven things you can – and should – do to protect yourself:
Read the rest of this blog post »

 
“When the devil loses his job, he becomes a tax collector.”

– Greek Proverb

ACTUAL CASE HISTORIES: It goes without saying: just as it is wise to look before you leap, when changing jobs, so too is it wise to consider the many steps you can legally take to minimize your future tax liabilities. Taxes are part of every employee’s life, but that does not mean that you must pay more than you need to. To the contrary, you can take into account the tax issues of a job change when (i) planning for it, (ii) negotiating it, (iii) taking steps during it, and (iv) even when completing your tax return.

Because I am not educated or experienced in tax matters, I cannot give tax advice or counsel on tax matters. That said, I can make certain suggestions regarding tax thoughts, and suggest – as I do with my clients – that employees consult with qualified tax counsel or tax advisor in contemplation, navigation and negotiation of job changes.

LESSON TO LEARN: Taxes are inevitable, but the amount you owe is capable of being legally reduced by taking appropriate steps to do so. But first, you must know what they are, and only then can you wisely navigate and negotiate to that end, after consultation with your personal tax advisor.

Note that, as I am not a tax law practitioner, this blog post cannot be considered tax advice. Additionally, this blog post is written and published in June, 2017. As tax-related laws change over time, you might want to ask your tax advisor whether the law has changed since this blog post was published.

WHAT YOU CAN DO: Paying taxes is required by law, but there is no law that requires you pay more taxes than you are required. Here are ten “tax thoughts” to consider, and to share with your tax advisor, when expecting, planning, and in the midst of a change of jobs:
Read the rest of this blog post »

“It is not enough to aim. You must hit.”
– Italian Proverb

ACTUAL CASE HISTORY: “This year, I absolutely must get what I’m due,” Delia told me, with a strong emphasis on the word “must.” “For the last three years, my bonus was less than half of what I should have received. And elevation to Partner better happen soon, too.” It didn’t take Delia long to tell me the point of her coming in; it was just the first minute or two of her initial consultation. She had come to us for help in getting ready to make a demand – in fact, an angry, non-negotiable demand – to her firm’s Managing Director who oversaw her work.

For five years, Delia had been Vice President at a middle-market investment bank that specialized in “TMT,” industry shorthand for technology, media and telecom. Though she’d located, initiated and nurtured several significant and successful investment banking deals for her firm, which had brought the firm several million dollars in fees, she was concerned that this year, like every other year before it, she wouldn’t receive what she was due: the bonus and the promotion she deserved. She even kept muttering something about “a big lawsuit,” which I ignored for the moment.

After talking Delia down from her angry perch, it didn’t take too long to figure out what her problem was, and what the best solution to her problem would be.

The problem was that Delia had the strange idea and the unreasonable expectation that her good work, her achievements, and her successes were all certainly known, and taken into account, by her firm’s Managing Directors. She operated on the strange and mistaken notion that “they all must have known” what she did each year. Even stranger, she didn’t consider that anyone might, for example, take credit for her achievements, or even try to steal from her the rewards and recognition that should follow her achievements. All she knew was “I’ve been cheated.” She had an awfully difficult time accepting the fact that she was contributing to the problem.

The solution we suggested was to create an “achievement scorecard,” a list of the significant achievements over the first eight months of the year, and the expected achievements for the remaining months of the year, and to make sure the “decision makers” knew of them prior to their annual deliberations regarding bonuses and promotions. Fortunately, Delia came to us in September, just the right time in the yearly annual cycle of business to create an “achievement scorecard.” Just as snow shovels go on sale in November, “achievement scorecards” should be created in August, for presentation to bosses in September and October.

Read the rest of this blog post »

Question: My employer recently lowered my commission plan without my consent, and now has threatened to also lower my salary by 16%. 

If I refuse to work for the lowered salary and commissions, can I collect Unemployment Benefits? Thank you for your help. 

Rob
Deer Park, New York 

Answer: Dear Rob: Many, many people worldwide are having their compensation cut, and so I am receiving many questions like yours. Unfortunately, as explained below, there is no simple, “black-and-white,” clear answer to your question, but let me give you my best explanation, from which you can make your best decision:       

1. Unemployment Benefits are provided to people who have either (a) lost their job without fault of their own, or (b) resigned with a truly good reason. As a general rule, Unemployment Benefits are reserved for people who lose their jobs due to no fault of their own, or who resign with a good-enough reason. They are not available for those who resign “without good reason.” So, we say to ourselves, “What is a good-enough reason to resign, and still collect Unemployment Benefits?”  

Well, surely you can collect unemployment benefits if you can show that, as examples, (a) your workplace is so dangerous that you truly feared possible loss of life or health if you remained; (b) you were frequently subjected to severe sexual harassment or physical abuse; (c) your job is still available to you, but requires you move your family 5,000 miles away, or to a different country; or (d) your compensation has been reduced from $50,000 a year to minimum wage per hour. These are extreme examples of “good reason”; the less severe changes – like yours – are less clear regarding whether they make you eligible to collect Unemployment Benefits.   

For great info and insight, consider viewing our 12-minute Sklover-On-Demand Video entitled “Unemployment Insurance Benefits – The 12 Basics You Need to Know.” To do so, just [click here.] 

2. In most states, a truly good reason is a “substantial violation or change in the terms of employment”; however, whether your situation qualifies as a “substantial violation” depends on your particular facts, events and circumstances. I often tell people that, in many instances, “In legal analysis, the facts are more important than the law, because quite often the facts determine which law applies and how it does so.” Your situation represents a pretty good example of that.  

Here are four actual case decisions made in the past by the Unemployment Benefits authorities in your State of New York:

a. Case Decision: Where an employer promised an employee an increase in salary commensurate with an employee’s newly-added responsibilities, but never paid it, and the employee resigned as a result, the employee was deemed eligible for Unemployment Benefits.

b. Case Decision: Where an employer promised a wage increase after promoting an employee to a more responsible position, but never paid it, and the employee resigned as a result, the employee was found to be eligible for Unemployment Benefits.

c. Case Decision: Where an employer promised a wage increase, but due to business conditions was unable to provide it, and the employee was already at the highest compensation for that position, and the compensation the employee was being paid was about the same being paid other such people in the industry, and the employee resigned, the employee was found not eligible for Unemployment Benefits.  

d. Case Decision: Where an employer promised to give a precise pay increase, and agreed with the employee on the precise date on which the pay increase was to begin, and failed to pay it, and the employee resigned as a result, the employee was found to be eligible for Unemployment Benefits.    

There are two “lessons” to be drawn from the case decisions noted above: (i) First, every different fact can make a big difference in the way a case is decided; and (ii) Second, Judges are people, too, and each Judge sees things a little differently than other Judges might see them. 

3. If your salary was lowered 16%, and your commissions were lowered, say, 20%, based only on those facts I would view your chances of being found eligible to be on the low side. It is simply impossible to predict with certainty whether or not you would be found eligible for Unemployment  Benefits.  

However, (a) if business at your employer was slow, and/or (b) you were not given any guarantee of compensation remaining the same, and/or (c) you were not given any new responsibilities, and/or (d) you are being paid commensurate with others in your company and your industry, then you would have a good chance of being denied Unemployment Benefits. 

On the other hand, (a) if you were given assurances of stable income and/or (b) you were given new responsibilities, and/or (c) you are being underpaid compared to others in your company and your industry, those factors would surely be in your favor. 

4. “Fairness” and “sympathy” can also play a significant role in these decisions.  In my experience I have seen other facts – which seem unrelated – play a big role in the decision of the Unemployment Hearing Judge or Administrative Law Judge who makes the ultimate decision. These include (a) if you are the sole financial provider for your family, (b) if your compensation reduction made you unable to provide for the welfare of children, (c) if you seem to be respectful and honest, or, on the other hand, (d) if you seem disrespectful, lazy and simply disinterested in working. As I noted above, it is important to remember that Judges are people, too. 

5.There is one alternative available to you that you may not have thought of: Consider requesting that your employer not contest your application for Unemployment Benefits.  There are many times and circumstances in which, for any number of reasons, it is just best for the employee to leave the job. In fact, it is just possible that this is really what your employer is seeking.  

For this reason, you might consider requesting, in writing, that your employer not contest your unemployment application if and when you leave. In order for an employer to reduce overall employee headcount, and not pay severance, this is sometimes seen as a WIN-WIN solution. Of course, you must be careful to be clear that this, in itself, is not a resignation.  

Want to apply for Unemployment Benefits, but afraid your former employer may oppose your Unemployment Benefits applications? Use our “Model Letter Requesting Employer’s Assurance Not to Contest Your Unemployment Application” with Ten Great Reasons. “What to Say, How to Say It.”™ To get your copy, just [click here.] Delivered by Email – Instantly!

 Rob, what you face is being faced by so many other people these days. While I can’t answer your question with precision, I hope this information helps you make your own decision regarding what to do. Please consider telling your friends, family and colleagues about our blog – we’d REALLY appreciate that!! Oh, yes, and tell them, too, that subscribing to our blog is free, fun and helpful. 

My Best,
Al Sklover

P.S.: Applying for Unemployment Benefits can be confusing! Eliminate the confusion, and make sure you don’t forget anything – use our 132-Point Guide & Checklist for Unemployment Benefits. To get your copy, just [click here.] Delivered by Email – Instantly!  

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