You've probably read our Relocation Tax Gross-up Beginner's Guide by now and hopefully you're up to speed on relocation tax gross ups—and then some. But just in case, here are some of the most frequently asked questions about relocation taxes and tax gross-ups:
In order to compensate for the tax ramifications of a relocation benefit, companies choose to ‘gross-up’ their relocation benefits. This means, in addition to the overall cost of the relocation benefit, the company also covers the cost of the tax liability to the employee. The tax liability then becomes a tax liability so many companies will cover the benefit, taxes on the benefit and tax on the tax.
Grossing up taxable benefits is a much better experience for the employee! This is important, so that your employee is not blindsided come tax season as that can be financially devastating for a family.
No! While it is recommended to ensure the best employee experience, grossing up on relocation benefits is not required. If your company chooses not to gross-up on relocation benefits, it’s very important that you communicate the tax ramifications to your relocating employee—before they accept the offer to move.