Plus Relocation

How does COVID-19 impact relocation taxability?

Under IRS Section 139, disaster relief payments are considered non-taxable income. Senior Director of Operational Analysis Angela Sieber looks at why this matters for mobility teams in this Remote Relo Tip Tuesday.

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Complete transcript: “Hello, I’m Plus Senior Director of Operational Analysis Angela Sieber, and welcome to a remote edition of Relo Tip Tuesday. As we’re all practicing good social distancing, I’m coming to you today from my home. And my question is, ‘How might COVID-19 impact relocation taxability?’

On March 13th, President Trump declared the COVID-19 outbreak a national emergency. This engaged existing tax code that allows for disaster relief payments. Section 139 of the code allows for ‘qualified disaster relief’ payments paid to employees by employers to not be considered as taxable income.

Let’s take a look at how this might impact relocation. Assume we have an employee who’s accepted a relocation package and is ready to begin their journey across the country. They’ve sold their home, their goods have been packed and loaded, and they are ready to begin that drive cross-country to start their new chapter. Unfortunately, the area in which they are moving to has been closed to short-term rentals due to the pandemic. The relocation has now been suspended, and for the time being, they will need to stay in temporary housing in their departure location while the company reimburses this expense to the employee.

Under normal circumstances, the temporary housing expenses would be considered as taxable income to the employee. However under the tax code, the employer is able to provide relief payments to employees that are experiencing additional relocation expenses due to COVID-19 without incurring additional taxable income for the employee. The company also saves the additional gross-up.

The tax code does not provide any guidance on requirements for documentation regarding these payments. However, it would be a good idea to create a tracking document or form to keep track of these payments. Ask your RMC about tracking these payments for you and making sure that they are not included in taxable income for the employee. Stay safe and thanks for watching.”