Tax code updates enacted at the federal level in late 2017 as part of the U.S. Tax Cuts and Jobs Act led to a number of changes for individuals and businesses. Among the many alterations to the existing tax code was a stipulation that directly affects corporations that want to relocate their staff to a different part of the country.
The removal of the moving expenses deduction means employees can no longer subtract the cost of a work-related move from their taxes. Now, when companies pay for some or all of an employee's relocation, that money is considered income and subject to all applicable taxes. Such a change necessitates a review of current policies and the potential adoption of new relocation strategies.
The changing attitudes around lump-sum moves
"Lump-sum moves could quickly increase in use following tax changes."
Lump-sum moves occur when companies provide a single amount as a reimbursement to employees following a corporate relocation, and could see an increase in use following the tax code changes.
The tax-saving benefits previously realized by paying for the moving costs for household goods directly - an alternative to the lump-sum approach - are no longer available. That means lump sums could rise in popularity.
Our 2018 Corporate Relocation Survey found about a third of all companies plan to expand the use of lump-sum move payments to address the tax code changes.
The pros and cons of lump-sum moves for corporate relocation
The potential for increased use of lump-sum moves means some businesses that aren't familiar with the process may want some more information about their pros and cons. Consider these lists:
Pros of lump-sum moves:
- A straightforward transaction in which the company simply pays the employee a standard amount.
- Less work for the organization, as the employees generally handle the details of their moves.
- Employees can put the money toward the specific expenses they must address to move successfully, even when addressing a very uncommon or niche need.
- It's simple to gross up the lump sum to cover the tax imposed on it to make sure employees have the amount they need to handle the move.
Cons of lump-sum moves:
- It's difficult to gain visibility into how much employees truly spend on moving and make adjustments accordingly.
- It can lead to more work than desired for employees, who have to organize all of the relevant moving details and processes themselves - something that can also have an impact on job performance as they plan and manage a complicated move.
- Employees are under no obligation to return money not spent on moving expenses, as they get to keep the entire lump sum.
Taking the next step with Avail Move Management and movr
Designed with the specific needs of corporate relocations in mind, the dashboard offers a mobile interface in which transferees can find and compare services while tracking their budget. Additionally, administrators can monitor lump-sum activity on a per-employee basis, providing data that increases the efficiency and effectiveness of the program moving forward.
By offering a streamlined interface for all stakeholders and addressing some of the most notable drawbacks of the lump-sum move option, Avail and movr are here to help all companies offer a positive and productive corporate relocation experience.