Relocation Archives

Did You Know That . . . Employer-Paid Moving Expenses are Now Taxed as Employee Income?

Published on May 8th, 2019 by Alan L. Sklover

Sklover Working Wisdom Tax Relocation Expense Reimbursement

. . . 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.)

Need to send a model memo or letter to make 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.]

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

“Claw-back: If no amount is stated, is it enforceable?”

Published on July 16th, 2014 by Alan L Sklover

Question: My employer has a “claw-back” agreement that extends 24 months beyond my repatriation from my expatriation in China.

While the items to be repaid are defined in the agreement, there is no dollar figure associated with any of these items. Is this still enforceable?

Lee
Shanghai, PRC

Answer: Dear Lee: The simple answer is “Yes,” but the best answer is “Yes, But.” Please remember that difference while I explain:

1. It is not at all unusual to find a financial obligation described in words without a corresponding amount set forth next to it. This is most often the case because, at the time that the agreement is written, the amount of the obligation has not been determined.

As one example, if your employer is entitled to “claw back” from you the value of any stock grant given to you if you should leave the company within 24 months of your repatriation, at the time of the agreement no one might have known the value of any such stock grant to be made.

As another example, if the “claw back” is for commissions paid during a certain calendar quarter, or relocation expense, the amount of such commissions or the amount of the relocation costs might not be known at the time of the signing of the agreement.

Look Before You Leap!! Get a copy of our 138-Point Master Guide and Checklist for Employees Contemplating Expatriate Assignments. Everything you forgot to ask about, and for, and then some! To obtain a copy, just [click here.] Delivered by Email – Instantly!

2. In fact, every lawsuit and arbitration has two phases: (i) first, it is determined whether or not a debt or obligation is owed; (ii) then, and only then, is it considered how much that debt or obligation might amount to. Lawyers and Judges call these two distinct stages of litigation (i) the “liability” phase, and (ii) the “damages” phase. And, as might be expected, the “liability” phase of a lawsuit involves “words,” “ideas,” and “concepts,” while the “damages” phase of a lawsuit requires numbers, calculations and simple arithmetic.

Let’s say your car and another car collided. The first question is “Whose driving caused the collision?” The second question is “How much – if anything – does the driver at fault have to pay the faultless driver?”

And in lawsuits or arbitration, it is often more difficult for a jury or an arbitration panel to decide the “damages” (or amount to be paid) than it is to decide the “liability” (or whether or not any obligation exists in the first place.)

3. Remember that, above, I said “The best answer is ‘Yes, but’?” Well, this is why: There are many defenses to “claw back” agreements, in fact, many more than you might imagine. In the law, we have what are technically called “Affirmative Defenses.” This means, quite simply, (i) “YES, I signed that agreement, (ii) BUT there is a good reason (or good reasons) I should not have to pay those monies back.” Hence the title “(i) Affirmative (ii) Defenses.”

Here’s a few of the many, many “affirmative defenses” that may be available to you: (i) YES, I agreed to pay the money back if I resigned, BUT I was really laid off and Human Resources let me tell people it was a resignation. (ii) YES, I did sign the agreement, BUT the reason I resigned was that I was almost raped by my supervisor one evening at the office. (iii) YES, I did agree to repay that money if I left the company, BUT the company required I work in China and my daughter’s asthma doctor told us she could die if we remained in China, so surely I couldn’t do that.”

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. We offer a Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons, just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly! 

4. By the way, although “claw back” and “repayment” are actually different, they are commonly used interchangeably. Technically speaking, “claw back” refers to “taking back” a payment of money made to you, such as (i) bonus, (ii) commissions, and (iii) leave of absence payments. Technically speaking, “repayment” refers to “reimbursement” of monies paid not to you, but paid to someone else on your behalf, such as (a) relocation costs, (b) tuition reimbursement, and (iii) your legal fees related to, for example, immigration issues.

That said, these days almost everyone uses the two terms interchangeably, and you should not be concerned if you or others use them incorrectly in a technical sense. To my mind, the ultimate test of word use is overall communication not technical accuracy.

5. In my experience, almost every employee has one or two good “Affirmative Defenses” to repayment obligations and, in any case, there is no downside to seeking either forgiveness or negotiated settlement. Claw backs and repayment obligations are good examples of how very “negotiable” employment and employment-related matters are. Employers do not want to spend many thousands of dollars to collect a rather small sum. Nor do employers want to let it get around that employees can – in fact – defeat collection efforts. And, too, some employers understand that you might one day be a prospective customer. This is one area in which I have found employers often negotiate or waiver in their efforts against employees much easier and more quickly than in many other situations.

Lee, thanks for writing in. I hope your employment transition is a smooth one, and that you consider challenging your possible – but not definite – claw back obligation.

My Best to You,
Al Sklover

P.S.: Post-employment, employers might use a Collection Agency to collect sums. To thwart those efforts we offer a Model Letter in response to Collection Agencies. Not guaranteed, but almost always works. Just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly! 

 Repairing the World,
One Empowered – and Productive – Employee at a Time™

© 2014, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.

“If my employer aborts my relocation, do I still have to reimburse it if I leave?”

Published on December 21st, 2011 by Alan L Sklover

Question: I have worked for a bank in Austin, Texas (my hometown) for five years. A year ago they offered me a promotion that involved relocation to New York City, which I jumped on. In April, 2011 I signed the bank’s standard “Relocation Expense Reimbursement Agreement.” It covers actual costs of relocation, including any stays in hotels.

The Relocation Expense Reimbursement Agreement provides that if I voluntarily leave working for the bank before 24 months, I have to reimburse them 100% if I leave within 12 months of the relocation, and 50% if I leave after 12 months, but before 24 months, that is, to April, 2013.  

I moved to New York and was there for several weeks, living in a hotel, which cost almost $15,000, when the bank decided that it would rather have me relocate to Idaho. So, in November, 2011 for the move from New York to Idaho I was required to sign a second Relocation Expense Reimbursement Agreement, this one lasting to November, 2013.

So, here I sit with two signed Relocation Expense Reimbursement Agreements, and two very expensive relocation bills. When I recently spoke to my Human Resources representative, she told me, “Both agreements remain in force.” She agreed to elevate the question to the Head of HR, and came back with the same response.

Can this be? If I decide this bank is not for me, do I really have to pay the bank back for both moves?

Shannon
Austin, Texas

Answer: Dear Shannon: What you describe is an example of “The agreement made sense originally, but doesn’t make sense now.” What you are really faced with is a circumstance that no one thought about when the agreement was written and signed.            

1. By the precise words of your two Relocation Expense Reimbursement Agreements, you will owe the monies for both agreements if you leave. If anyone reads your first repayment agreement, and then hears that you left the bank, they would say, “A simple reading of the agreement says you owe the bank the reimbursement.” However, we do not read agreements in a vacuum; rather, we read agreements taking into account other circumstances, especially new circumstances. And when those new circumstances came about by the decision of one of the parties, the other party is usually excused from his or her “performance.”      

2. However, a very good argument exists that, while there was no “expressed” provision that said “If the bank has you move away from New York, you don’t have to repay,” there was nonetheless such an “implied” provision in your reimbursement agreement. It is implied in every agreement, whether or not related to employment, that if one party materially changes the circumstances making the other party’s “performance” difficult, if not impossible, that may “forgive” the other party’s performance.

Let me give you a made-up example: Bob and Joe agree that Bob will paint Joe’s car blue for $100 by Tuesday, or pay a penalty of $50 per day for the delay. On Monday, Joe drives his car to an unknown location, and won’t tell Bob where it is. Surely Bob is excused from the penalty, because Joe acted on his own to make performance impossible. 

From my experience with agreements, and employment agreements, in particular, I believe there was implied in your Relocation Expense Reimbursement Agreement a clause that should have said: “If the bank moves you away from New York for its own purposes, you will not have to reimburse the bank for its moving you there in the first place.” It’s just that neither you nor the bank thought of that possible circumstance when it was given to you to sign.

3. Because the bank aborted your relocation, and moved you away from New York for its own purposes, common sense dictates that the agreement does not cover that situation, and therefore does not require you to repay those monies. Shannon, I have reviewed and negotiated many relocation reimbursement agreements over the past 30 years. I don’t think I ever thought to put such a provision into one, and I can’t fault you or the bank for not catching that possible circumstance, either. It’s my expectation that the first of the two Relocation Expense Reimbursement Agreements you signed would not be enforceable for this very reason.

4. Why not reach out – in writing – either to the Head of HR, or even to the Bank CEO, for a confirmation of my common-sense belief that the first reimbursement agreement is not effective. Frankly, I think you are dealing with a lower-level HR representative who is uncertain of what to do, so she is not doing anything. In a respectful email, I suggest you reach out to the Head of HR, yourself, or perhaps even the Bank’s CEO, for confirmation that the first agreement is not going to be held against you. Though it is “going over the head” of someone, I think it is entirely justified and reasonable that you do so.

5. It seems the bank wants to keep you; if so, they would likely want to keep you feeling that you’re being treated fairly, too. Being chosen for promotions and relocation is a sign you are viewed as a valuable employee. A Relocation Expense Reimbursement Agreement is meant only to prevent the bank from investing in you, and not being able to enjoy the return on its investment. Your move to New York was the bank’s decision, and apparently the bank’s mistake, and should not be something that you are held accountable for. I am fairly confident that you’ll find the bank actually agrees with that, even if it means going to the Head of HR, the CEO, or perhaps even the Board of Directors. Common sense almost always wins out.

6. That said, you may end up needing the assistance of an attorney. I do expect you will be successful by the “informal” approach above. If that does not work, you may need to have an attorney assist you in correcting this problem.

You can locate an experienced employment attorney from the Legal Services section of our blogsite by simply [clicking here.]

Shannon, I suggest you be proactive, and go “higher up” to get peace of mind on this issue. You surely deserve it. I hope you will let us know how your attempt to do that meets with  success.                                                                                                 

Best,
Al Sklover

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. To obtain a copy of our Model Memo entitled “Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons,” just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly!

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2011 Alan L. Sklover, All Rights Reserved.

“Can a relocation repayment obligation last forever, if the words suggest that?”

Published on September 6th, 2011 by Alan L Sklover

Question: Hi Alan, I’ve been a long-time reader of your blog, and even used a lot of your advice when recently accepting a job that took me from the U.S. to Toronto. Now that I’m here, the job seems to be going well, but I’ve noticed something odd in my relocation agreement.

The company is paying for my relocation from the U.S. which includes legal services for immigration and tax advice. I knew that I’d have to re-pay the relocation if I resigned within two years, but I’ve just read a line in my employment agreement that says that it’s “two years from the date of the last relocation assistance provided.”

Does this mean that every time the immigration lawyers file a form for me and bill the company $100, that resets the two-year clock? The tax assistance alone will take me well into my second year with the company, and immigration can take a few years. Can I essentially be obligated for the relocation costs indefinitely? Thanks in advance, and please keep the great blog posts coming!

Dan
Toronto, Ontario, Canada

Answer: Dear Dan: So good to hear that you have been with us for a while now, and that you are finding our information, insights and inspiration helpful. Let’s see if we can help you out with this issue.

1. As I often say, “With any agreement, first read the words.” You are correct, and wise, to carefully review the words of the agreement you have signed. From its wording, I would agree with you that, at the least, you may have something of an issue, or problem, on your hands regarding the possibly-forever relocation repayment obligation.  

2. That said, there is a “rule of legal construction” that “If an interpretation of words leads to an illogical result, that interpretation is viewed as likely incorrect.” Let us think about the implications of the wording of your agreement: (1) Your relocation requires the continued use of immigration and tax assistance. (2) For this reason, your supposedly “two-year” repayment obligation is really “forever.” (3) Said a bit differently, your repayment obligation is absolute, unconditional and “not two-years.” (4) How can something be “two year” and “not two year” at the same time? (5) According to simple logic, it cannot.  

3. The law everywhere is based in common sense; it is much more common-sensible that your use of “continued immigration and tax assistance” were not meant to be included in the concept of repayable “relocation assistance.” While immigration and tax assistance are part of your employer’s “relocation” assistance package, it seems much more likely that when “relocation” was used in this sentence, it referred to “relocation” in the narrower sense of the word, that is, limited to such things as flights to Toronto to find housing, moving your personal goods, and required deposits on utilities such as electric.   

4. To accept any other result would require either a strained and non-sensible interpretation, or, worse: that you were intentionally deceived or defrauded. As an attorney who drafts and reads very carefully, I expect and hope I would have noticed that unusual wording in your relocation package. If I did, I would have said to myself, “Ooh – watch out: this was written by either a sloppy draftsperson or a sneaky lawyer.” I think it was Napolean Bonaparte who said, “Whenever the choice is between deceit and incompetence, it’s almost always incompetence.” If it was incompetence, then it is a mutual mistake, and should be easily fixed. But, if this was intended to trick you, that, too, would not likely be countenanced by any court if it ever got that far.

5. As I often suggest, why don’t you take this up with Human Resources, in a respectful email that lays out the analysis above. You might send an email to your HR representative mentioning what you mentioned to me: you just noticed this strange – and illogical – phrase in your repayment agreement, and you’d like to make sure that the illogical interpretation is not the one HR will take if and when you ever leave the company. Mention that you would like to “put to rest” any and all of these concerns, so that you can focus your thoughts and energies on being the best employee possible, not worrying that someone might have made a costly error. This path is usually successful; even if it is not, it is the best first path to take.

6. If that first suggested path does not lead to resolution, take the same approach with the head of your group or division, and even if necessary, your CEO, as businesspeople can usually tell HR people what to do. Dan, some group or division thought enough of you to both hire you and accept the considerable costs on its P&L of your relocation. It’s unlikely they now want to lose you, or de-motivate you. Be frank, be respectful, but be assertive, too. No one likes being treated illogically or, worse, being duped. I may be wrong, but I have some real confidence that the first or second paths outlined here are likely to get you the result and resolution you seek. At the same time, be careful not to create the impression that you are being adversarial or threatening, which is not your true motivation.

Dan, I sure hope this helps. If it does, great. If it doesn’t, please write again, and we’ll try to think even harder for you.

Thanks, again, for writing in, and too, for your kind compliments. Hope you’ll spread the word!

Best,
Al Sklover

If you agreed to repay your former employer (a) tuition reimbursement, (b) relocation expenses, (c) a sign-on bonus, or even (d) a short-term loan, you may be able to have that obligation waived and forgiven. To obtain a copy of our Model Memo entitled “Model Letter for Repayment Obligation Forgiveness – with 18 Great Reasons,” just [click here.] “What to Say, and How to Say It.™” – Delivered by Email – Instantly!

 © 2011 Alan L. Sklover, All Rights Reserved.

If You’re Asked to Relocate, Think Ahead to Your Need for “Re-Relocation”

Published on August 19th, 2004 by Alan L Sklover

ACTUAL CASE HISTORY: Jeff was a rising star in foreign exchange trading. He co-managed his firm’s trading desk in New York, had experience in the Tokyo office, and was now given the assignment to rebuild and refortify the firm’s London office. To entice him to accept the assignment, he was given a generous relocation package, including airfare for his entire family, transport of their household belongings, a company-provided residence and tuition for the kids.

Unfortunately, the changes Jeff instituted resulted in “pushback” by the London staffers, and Jeff was asked to leave the company. He was fine with that, and simply asked that he and his family be re-relocated. The answer was a polite, “No.” Jeff was in a bind: he was out of a job, he and his family were soon to be without a home, in the middle of the school year for his kids, and without any of the benefits and entitlements the company had always provided. If only he had asked for mirror-image, “re-relocation” rights.

LESSONS TO LEARN: In SkloverWorkingWisdom™ we suggest people use in their workplace negotiating, one special focus of the method is “Risk Limitation.” It’s one of “The Three R’s” to be sought: while we seek [R]ewards for our efforts, as we take on new [R]esponsibilities, we must always seek out [R]isk Limiters, as well. In each transition, in each step, at each moment, we must try to locate the risks of the moment, and seek to limit them, or their possible effect, on us.

WHAT YOU SHOULD DO: Whenever asked to relocate for a job, whether domestically or internationally, consider requesting written assurances that, if and when the assignment ends:

Read the rest of this blog post »


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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