By: The Knowledge Management team at Pro-Link GLOBAL
There have been several positive new changes to the Employment Permits scheme in Ireland. A new online application system will debut in September, making the application process for work permits easier for employers and foreign nationals in The Emerald Isle. Also announced last week, immediate changes were made to the Highly Skilled Eligible Occupations List (HSEOL) and the Ineligible Categories of Employment List (ICEL) allowing Irish sponsoring companies to employ more foreign nationals. Further, the requirements for Trainees under Intra-Company Transfers have also been relaxed.
The Steady Rise of Ireland’s Labor Markets
According to the Expert Group on Future Skills Needs (EGFSN), which advises the Irish government on current and future labor needs, the Irish labor market has seen steady improvement in the last three years, and that improvement is beginning to be felt by employers in worker shortages in certain high-demand skills. A recent study by the specialist recruitment firm Hays Ireland stated that Ireland is now beginning to experience a “talent mismatch.” In other words, while there is a measurable but declining unemployment rate (projected to be 7.5 percent by September), Irish employers are finding themselves unable to fill certain skilled positions with local labor. This problem is exacerbated by the large emigration out of Ireland which occurred during the last recession. As a result, employers are looking to foreign workers to fill the gaps in numerous sectors, including IT, engineering, and skilled construction.
Employment Permits Online System (EPOS) Moves Forward
The Department of Jobs, Enterprise and Innovation (DJEI) announced last week that it will be assisting employers by making the Employment Permits process easier and faster for their foreign workers. In September, the DJEI will roll out its new Employment Permits Online System (EPOS), which will provide intuitive online application completion and filing, document submission, and fee payment for Employment Permits in Ireland. This much-anticipated improvement should result in a more convenient process with a faster turn-around time for applicants.
Pro-Link GLOBAL’s KGNM office in Ireland reports that the currently-used employment permit application forms have already been withdrawn from use and are being replaced by the electronic procedure and a new suite of revised paper forms. The Employment Permit Section is asking applicants to delay filing new applications in August, if possible, in order to ease the transition to the new online process in early September. For immediate submission needs, the Section is entertaining urgent requests on a case-by-case basis and will provide paper copies of the new amended forms if necessary.
Additions to Occupation Lists
Also to support employers experiencing labor shortages, the DJEI has made immediate additions to the HSEOL list which determines whether an applicant holds an occupation eligible for a Critical Skills Employment Permit. The DJEI also made adjustments to the ICEL list of occupations ineligible for employment permits.
The following occupations have been added to the HSEOL:
Tax consultants specializing in non-EEA taxes; and
Accountants working in multinational corporation (MNC) global audit services.
Of particular welcome is the addition of qualifying accountants to the HSEOL. This will allow multi-national corporations operating in Ireland to more easily employ accounting professionals to assist in international tax filings and work in key senior finance roles. Officials are hopeful that this new measure will make Irish offices a more attractive option for multi-national business. Previously, such companies were limited to recruiting foreign national accountants credentialed by the relevant accountancy bodies in the British Isles. Now accountants registered or qualified by the American Institute of Certified Public Accountants, the Philippine Institute of Certified Public Accountants, or the Institute of Chartered Accountants of Pakistan also qualify for Employment Permits.
In addition, the following occupations are now considered general skills in short supply and have been removed from the ICEL ineligible list and are thus now open to Employment Permit applicants:
Legal associate professionals fluent in an official language (other than English) of a non-European Economic Area (EEA) state; and
Executive chefs, head chefs, sous chefs and specialist chefs specializing in a non-EEA cuisine are removed from the ICEL. Previously, these individuals fell under the ineligible Chef category of the Food Preparation and Hospitality trades section of the list.
Relaxed Requirement for ICT Trainees
In the final noteworthy part of last week’s announcement, the DJEI reduced the minimum employment period for Trainees under the Intra-Company Transfer (ICT) Permit scheme from six (6) months to one (1) month. Now foreign national trainees only employed with their foreign employer for one month are eligible for assignments at the company’s branch or affiliate in Ireland.
These changes to the HSEOL and ICEL lists and to the ICT trainee regulations are effective immediately, and the details will be incorporated into the new EPOS online application process and the accompanying amended forms due out in early September.
How These Changes Affect You
Irish employers and foreign nationals desiring to work in Ireland received some welcomed improvements to the Employment Permits scheme. The new EPOS electronic application system due to come online in early September should make it faster and more convenient to process Employment Permit applications. Further, employment opportunities for foreign nationals are growing in Ireland due to the steadily improving labor market. Labor shortages in certain key skills categories have led the DJEI to expand the opportunities for employers and foreign nationals in Ireland. Liberalization of the HSEOL and ICEL lists and the ICT scheme are the most recent positive changes.
As with any improvement in the process, there may be temporary inconveniences during the transition. While use of the current application forms has been suspended, the DJEI is optimistic that the new EPOS and accompanying amended forms will be available early in September. In the meantime, applicants may want to consider delaying submission of new Employment Permit applications until the new EPOS comes online. However, if there is a need that cannot wait, the DJEI is making accommodations for submitting applications over the next few weeks.
Employers and foreign national employees anticipating moves in Ireland over the next few weeks should be in close contact with their immigration advisors to anticipate and respond to these changes effectively.
Caveat Lector - Warning to Reader
This is provided as informational only and does not substitute for actual legal advice based on the specific circumstances of a matter. We would like to remind you that Immigration laws are fluid and can change at a moment's notice without any warning. Please reach out to your immigration specialist or your client relations.
Last year’s tax extenders legislation included provisions accelerating the required filing dates for information returns, including the Form W-2 and the various Forms 1099. Those accelerated filing dates will be in effect for 2016 returns due in 2017. However, there has been relatively little publicity or guidance concerning this important change, and Worldwide ERC® members should make sure they are aware of it, and prepared.
Prior to the new law, the employee copies of Forms W-2 were due to employees at the end of January, but the copies for the IRS and Social Security were not due until the end of February (paper) and the end of March (electronic). The same deadlines applied to Forms 1099.
In order to better combat refund tax fraud, the deadlines for filing with the IRS and Social Security have been moved to mirror the January 31 due date for the employee copies of all of these forms. In addition, the old automatic one-month extension for these filings has been eliminated, and an extension is now only available on a case-by-case basis for “good cause shown.”
As a result, processes must be changed, and information must be assembled and assessed earlier than in the past. This may cause significant problems that relate to wage information received from third parties, such as providers of taxable relocation services. The time to perform necessary adjustments, such as reconciling gross-ups, will be shortened.
The American Payroll Association has warned that this, in turn, will significantly increase the need for subsequent adjustments, including Forms W-2c. It will also likely lead to more amended tax returns. Moreover, companies may well find it necessary to demand information from third party providers on an accelerated schedule, which undoubtedly will result in an increase in errors in that information that must subsequently be corrected. And of course, payroll processing software will require modification.
Although payroll professionals believe that most large companies are aware of and preparing for these changes, may smaller and mid-size companies likely are not. Worldwide ERC® members should make sure that their systems for processing relocation-related items have been updated.
Posted by Peter K. Scott
Recent events and practices in the states of Minnesota and Maryland prompted a re-examination by Worldwide ERC®’s Real Estate and Mortgage Forum of the status of the blank deed in those states.
In 2014, Worldwide ERC® published, and continues to maintain, an information chart outlining the various known issues and risks relating to the use of a single deed (a “blank deed”) versus a two-deed process in completing relocation home sales in each state. That chart is currently available on the Worldwide ERC® website at http://www.worldwideerc.org/gov-relations/us-tax-legal-resources/tax-legal-mastersource/Pages/single-dual-deed.aspx.
An issue arose in Minnesota concerning the ability of notaries to add anything to a deed that has been signed and that the notary has certified.
In 2014, a notary was asked to check a box on a deed that had inadvertently been left blank by the seller when the deed was executed. The box simply attested to whether the home was on well water, and the notary was specifically authorized to make the alteration. However, the Minnesota Department of Commerce, which administers the statutes governing notaries, determined that a notary who alters a document after the document had been signed and notarized is guilty of fraud. The notary settled the matter by paying a fine of some $3,500 personally; the Department’s position is that the fine must be paid individually by the notary rather than by an employer or customer.
Minnesota has generally been a state in which the use of a single deed for relocation two-sale transactions is common practice. However, if notaries are involved in the transaction, it appears that they will no longer be allowed to add the buyer’s name to the deed after having notarized the seller’s signature.
Worldwide ERC® has discussed the issue with Minnesota companies engaged in relocation transactions, and with the National Notary Association. Although the issue may prevent notaries from adding buyer names to blank deeds, it does not appear that the participation of a notary is necessary for that step in the process. Further, addition of the name is typically authorized by a Power of Attorney from the seller(s). Consequently, while Worldwide ERC® will continue to monitor the issue, currently it does not appear to present any problems other than possibly necessitating modification of the process by which blank deeds are completed, and eliminating the participation of licensed notaries in that step.
The single deed/two-deed chart has been modified to include a note concerning this issue.
For many years, the largest counties in Maryland had been thought to collect two transfer taxes even if only one deed was used. Because Maryland’s recording of deeds and administration of transfer taxes is the responsibility of the 23 county clerks, not all of whom historically followed the same rules, it has been difficult to identify a common treatment of blank deed transactions.
Until recently, common wisdom was that certain county clerks, particularly in the larger counties, would sometimes seek to impose two transfer taxes. However, this was an isolated occurrence, and only in high-value transactions ($1 million or more). Consequently, Worldwide ERC®’s analysis, reflected in the single deed/two deed chart, was that in most cases companies could safely utilize the one-deed process in Maryland, but that county clerks sometimes asked for a copy of the HUD-1 and might seek to impose two taxes.
Recently, a new analysis of the statutory provisions and known practices in Maryland was done. It confirmed that there is little if any statutory basis to impose two taxes on blank deed transactions. Moreover, recent experience is that none of the county clerks seem to be seeking to impose the second tax.
Consequently, Worldwide ERC® has amended the one deed/two deed chart to remove the language suggesting a risk of two taxes in the state.
Worldwide ERC® is grateful to John Brennan of Brennan Title Company, who is Vice-Chair of the Tax Forum, for the work of his staff and attorneys on this issue.
By Gordon Kerr
On June 23, the United Kingdom (UK) will hold a referendum and voters will head to the polls to cast ballots on whether the UK will leave or remain in the European Union (EU). Initial polls showed a small majority of voters in favor of the UK remaining in the EU but more recent polls have tilted the balance slightly in favor of the UK leaving. So the outcome on what’s being called “Brexit” is no means certain.
If the UK does vote in favor of leaving the EU, the biggest impact is likely to be the end of free movement of labor between the UK and the EU. This would clearly have a significant impact on mobility management in the region.
While there is no clear blueprint for what would follow the exit of the UK from the EU, the next steps in the process are known and are as follows:
The UK Government will request the EU to start the "Article 50 process" - the process which exists for the exit of a member state, but never previously used. The UK would enter detailed negotiations about both past and future arrangements. Agreement would need to be concluded on how to "unwind" previous rights and obligations, with decisions taken on how the UK and the EU would interact in the future. These negotiations would need to fit within a 2 year time period, unless the remaining 27 EU states agreed to give the UK an extension.
Following conclusion of exit negotiations, including future UK/EU trade arrangements, the next step will be for the UK to enter into separate trade negotiations with non-EU countries.
The legal consequences of Brexit would be considerable. Subject to the terms of the new trading agreements, all EU treaties, regulations and decisions of the European Court of Justice would cease to apply to the UK unless specifically preserved by UK law.
Agreeing to a new relationship with the EU could be problematic. The UK would wish to avoid the imposition of "free movement of labor" obligations which the EU has in place in their trade agreements with countries such as Norway and Switzerland. "Leave" campaigners believe that the UK will be able to negotiate an EU trade deal which will allow the UK to limit immigration from the EU to skilled immigrants only, in line with UK immigration rules for non-EU citizens.
Brexit could also mean wider political uncertainty for the UK, with a "leave" vote widely expected to trigger the resignation of UK Prime Minister David Cameron. It could possibly also lead to a further independence referendum by the Scottish who generally are more favorable to maintain their ties to the EU.
Immediately following the results of the UK vote on June 23, Worldwide ERC® will issue a Member Advisory with the outcome and any additional information known at the time.
Gordon Kerr is Vice Chair of the Worldwide ERC® Government Affairs Global Forum and Director of the Employee Mobility Unit at Morton Fraser. Gordon is based in Edinburgh, Scotland.
One of the most frequently asked questions surrounding the hiring or transfer of personnel is whether expenses incurred by the employee (including family) to visit a location before deciding whether to go there (sometimes referred to as “get-acquainted tours”) are taxable to the individual if paid or reimbursed by the company.
Employers often pay or reimburse the expenses of prospective employees, newly hired employees, or current employees traveling to the employer’s place of business, including the costs of transportation, meals, and lodging. The activities in which such individuals participate while visiting the employer often include a get-acquainted tour of homes and the area in general (for example, schools). Depending on the circumstances, the costs of these trips may be taxable to the employee, and subject to withholding, payroll taxes, and inclusion on the W-2.
Generally, since 1993 the costs of a “househunting” trip have not been deductible as moving expenses, and therefore employer payments or reimbursements of the costs are taxable. Get-acquainted tours would fall into this category. However, there are exceptions to this rule in limited circumstances, discussed below.
One exception is for payments for prospective employees, that is, individuals who have not yet decided to accept employment with the employer.
The payment or reimbursement generally should not constitute taxable income to a prospective employee or wages subject to withholding by the prospective employer, as long as the employer agrees to bear the costs of the trip before the individual accepts employment with the employer. See Rev. Rul. 63-77, 1963-1 C.B. 177, in which the IRS reached this conclusion in the case of prospective employees’ travel expenses incurred in interviewing at the prospective employer’s home office. Therefore, neither a Form W-2 nor a Form 1099 is necessary.
According to the IRS, "the payments in question are not remuneration for services rendered or to be rendered in an employment relationship." The same conclusion should apply where the primary purpose of the trip is the prospective employee’s attending the get-acquainted tour, since Code §82 only requires inclusion in gross income of moving expense payments or reimbursements "in connection with the performance of services." Reg. §1.82-1(a)(5). Under this rule, payments for both prospective employee and family would not be taxable.
If, however, the employer’s agreement to pay or reimburse the expenses is contingent upon the prospective employee’s ultimately being employed by the employer, the payment or reimbursement would constitute consideration for services to be rendered, even though the individual is not an employee at the time the expenses are incurred. Rev. Rul. 66-41, 1966-1 C.B. 233. For this reason, the payment or reimbursement under such an agreement should be treated in the same manner as in the case where the expenses are incurred after the individual becomes an employee, discussed below.
It is common for a newly-hired employee to visit the new city after he or she has already agreed to become an employee. Or a current employee may visit a new city for a get-acquainted tour or househunting before he or she agrees to accept the transfer.
If the individual is an employee (i.e., has agreed to work for the employer, regardless of whether the individual actually has begun performing services for the employer, or is already working for the employer at another job location) at the time the expenses are incurred, the proper tax treatment of the payment or reimbursement depends upon the characterization of the expenses. If the expenses are characterized as moving expenses, the payment or reimbursement will constitute gross income to the employee under Code §82 and the employer will be obligated to withhold income and employment taxes thereon. As noted earlier, househunting in a new location is a common nondeductible moving expense.
If, on the other hand, the expenses are characterized as expenses incurred by the employee in carrying on the employer’s business (and assuming the employee’s "tax home" has not yet changed to the new place of employment), the payment or reimbursement will not be includable in the employee's income or subject to withholding by the employer provided that the accountable plan rules of Section 62 are met. But the key here is that the employee must primarily be doing business in the new city, not just visiting to look it over or check out the housing market.
Where the purpose of the trip includes both providing the employee with a get-acquainted tour (generally a moving expense) and the employee conducting the employer’s business, "fixed" expenses should be characterized according to the predominant purpose of the trip and "incremental" expenses should be characterized according to their specific purpose. For example, if the primary purpose of the trip is the employee’s participation in a bona fide business meeting of the employer, the transportation expenses and the meals and lodging expenses necessary for the employee’s attendance at the meeting should be characterized as expenses in carrying on the employer’s business. If the employee remains an additional day in order to take part in the get-acquainted tour, any additional meals and lodging expenses should be characterized as moving expenses.
Travel, meals and lodging expenses for a spouse or family to accompany a current employee or a new employee who has already agreed to accept employment clearly are taxable, even if the primary purpose of the trip for the employee is business. Moreover, the presence of the spouse/family may make it more difficult to characterize the primary purpose of the employee’s trip as business.
The primary purpose of the trip must be determined based on all facts and circumstances, and the relative time spent on the two activities is an important factor in making this determination. Reg. §1.162-2(b)(2).
Consequently, company payments for most get-acquainted visits to a new city for either new-hires or current employees will be taxable. Companies have sometimes argued that a get-acquainted trip for such workers is not taxable because it is akin to a recruiting expense. Unfortunately, the tax law does not support such an argument.
The European Union (EU) and US recently made the details of the “Privacy Shield” available to the public. A month earlier, EU and US negotiators had reached an agreement on the “Privacy Shield”. It would replace the “Safe Harbor” and allow US companies to be in compliance with EU data security and privacy regulation when transferring EU personal data to the US. Last fall, the European Court of Justice invalidated the EU-US “Safe Harbor”.
The Full Story:
On February 29, the European Union (EU) and US made the details of the “Privacy Shield” available to the public. On February 2, negotiators for the EU and US reached an agreement aimed on allowing US companies to continue to more easily transfer personal data from the EU to the US. The agreement, which is being called the EU-US Data “Privacy Shield”, would replace the EU-US Safe Harbor. The agreement is not final, as EU data privacy regulators need to review the proposal and provide their recommendation to the EU Commission as to whether the deal should be adopted by the EU. This is expected to occur in the next few months.
If implemented, the Privacy Shield would provide US companies with certain regulatory protection from enforcement action if they follow the guidelines of the agreement. To comply with the Privacy Shield Framework, US companies would have to self-certify with the US Department of Commerce and publish their commitments on how personal data would be processed and how individual rights would be guaranteed. These commitments would then be subject to US law and enforceable by the US Federal Trade Commission (FTC).
The Privacy Shield Framework is divided into four specific areas. Those are 1) EU Individuals’ rights and legal remedies, 2) Program oversight and cooperation with EU data protection authorities, 3) Key new requirements for participating companies, and 4) Demonstration of limitations and safeguards on national security and law enforcement access to data. A copy of the Framework can be accessed at: https://www.commerce.gov/privacyshield
The first section of the Framework provides EU citizens with recourse should they believe the privacy or security of their personal data has been compromised. US Companies participating in the Framework must put into place a system to address and investigate complaints. Companies have 45 days in which to respond to the individual acknowledging receipt of the complaint. The individual can also pursue private causes of action through U.S. state courts and participating companies must agree to binding arbitration if the matter has not be resolved through other means.
The next component of the Framework falls on the US Department of Commerce and the FTC. The Department of Commerce has agreed to help ensure compliance with the program by verifying that participating companies submit all the necessary information, identifying and addressing false claims of participation, conducting periodic analyses of the program as well as other safeguarding activities. Both entities would also establish channels of communication with EU data privacy authorities to exchange information regarding complaints and program material and to provide enforcement assistance.
The third area addresses the requirements for participating companies. Companies must inform individuals about their rights to access their data, provide information on the obligations of the company to supply individual data to law enforcement and other authorities and the liability of the company in cases of the transfer of personal data to third parties. Companies must limit the transfer of personal information to the data that is needed for that purpose of processing and enter into agreements with third parties on the limitations and requirements that come with the transfer of the data. The Framework also outlines those instances when companies need interact with the Department of Commerce and FTC.
Finally, under the Framework, the U.S. Department of Justice and U.S. intelligence agencies have provided the European Commission with information about the limitations of US government agencies to access data held by U.S. companies and the policies in place to ensure the data is being accessed in adherence to US laws. If the agreement is adopted, EU citizens who have questions about communications being monitored by US intelligence officials could submit their inquiries to an Ombudsman. The U.S. Department of State would establish the Ombudsman to respond to the inquiries about U.S. intelligence policies regarding communications or signals intelligence.
EU data privacy regulators, known as the Article 29 Working Party, along with a committee comprised of EU member representatives are reviewing the agreement to provide their advice to the EU College of Commissioners. It is not certain that the Working Party will recommend supporting the agreement and if the EU Commissioners will approve it. However, it is likely that some sort of agreement will be reached between the EU and US. In the meantime, the recommendation of Worldwide ERC® is that members continue on the course of implementing and adhering to Model Contract Clauses or Binding Corporate Rules.
Posted by Tristan North
The government of the United Kingdom has been engaged in a series of actions designed to make sure that there is an adequate supply of residential housing. As a part of this program, on December 28, 2015, the government sought comment on a proposal that would increase by 3% the Stamp Duty Land Tax (SDLT) on purchases of “additional residential properties”, to be effective April 1, 2016.
The SDLT is a transfer tax on real estate, payable by the buyer, that applies to purchases in England, Wales, and Northern Ireland. Currently, the tax does not apply to purchases under 125,000 Pounds. It is 2% of the purchase price for transactions between 125,000 and 250,000 Pounds; 5% between 250,000 and 925,000 Pounds; 10% between 925,00 and 1.5 million Pounds; and 12% over than price. The proposal would add an extra 3% to all such transactions (including those below 125,000) if the purchaser already owns another residential property. It is intended to enhance the number of homes available in the market by discouraging purchase of homes as rental properties or as second homes.
In a typical UK relocation home sale transaction, as in the United States, the relocation management company (RMC) or employer will not take title to the old home it purchases from the transferring employee. It will pay the full purchase price, and take over all the ownership costs, risks, and benefits, but will leave the employee in title until the home is sold. Unfortunately, the employee will usually purchase a new home during this period, and will appear to own two residences rather than one. In such circumstances, it may appear that the extra 3% tax should apply to the purchase of the new home.
Although the proposed rules include a provision for a refund of the extra tax if the old home is disposed of within 18 months, the tax will still have to be paid initially, and then procedures will have to be developed to obtain a refund. The tax will be paid by the employer, and it or the RMC will have to waste time and money recovering it. Moreover, this procedure will also burden the government, which will have to process the receipt of payments, and arrange for the refund, in 100% of the relocation cases.
On February 18, 2016, Worldwide ERC® submitted a comment letter suggesting that rather than a refund mechanism there should simply be an exemption for relocation transactions. The letter can be found here
. Such an exemption already exists to excuse collection of SDLT on the RMC’s initial purchase of the home. Worldwide ERC® suggested that the exemption be extended to encompass the additional SDLT in the proposal. It is hoped that the UK Treasury will recognize that the collection and refund of the additional tax would not be useful or productive, and that it will further burden the residential housing market rather than enhancing it.
Coincidentally, Worldwide ERC®’s letter was submitted on the same day as the announcement of the opening of Worldwide ERC®’s new office in London. Both the letter, and the announcement, evidence Worldwide ERC®’s strong commitment to an active presence in EMEA.
Posted by Peter K. Scott
Relocation home sale practices and procedures are different than the usual real estate sales transaction. Structured as two separate, independent sales (one from employee to company or Relocation Management Company (RMC), and a second from that buyer to an outside buyer) in order to comply with applicable tax rules and facilitate a smooth disposition of the employee’s home, these transactions may nonetheless raise red flags with those unfamiliar with the process.
A continuing issue for Worldwide ERC® members involved in these relocation home sale transactions is unfamiliarity with the transactions among some institutions providing home loans to buyers of the homes. Although representatives of larger lenders usually do understand the various procedures involved, representatives of lenders who do smaller numbers of such transactions frequently do not. This often leads to questions about the identity of the seller, the deeding processes used, the application of underwriting guidelines designed to prevent abusive “flips,” etc, that can cause delays and frustrations for the buyer seeking a mortgage, and for the company or RMC that is the seller.
For example, the common “blank deed” process, under which the deed runs from the employee to the outside buyer, sometimes provokes questions about who is the seller in the second transaction, and in some cases insistence on revised deeding. Similarly, in the sale from the employee to the company or RMC the settlement documents common in other types of real estate sales will not exist, again generating questions that can sometimes cause delays or restructuring of the transaction.
Recognizing these and other problems, members of Worldwide ERC®’s Real Estate and Mortgage Forum undertook a project to develop a standard explanation of relocation home sale transactions that could be used by members to help educate lender representatives about the process and rationale of the typical relocation home sale transaction. That document was recently finalized, and is available to Worldwide ERC members and others on the Worldwide ERC® website at http://www.worldwideerc.org/gov-relations/Documents/LenderExplanation.pdf. It is hoped that an explanation from an unbiased and knowledgeable third party will help companies and RMC’s clear up lender questions that otherwise might delay or imperil the outside sale transaction.
Worldwide ERC® is grateful to the Forum members who gave of their time and expertise to produce this very much needed document. They include Forum Chair Eric Arnold of Stewart Title Guaranty Company; Forum Vice Chair Bob Nish of Nish & Nish; Linda Hargreaves of Old Republic Relocation Services, Jay Hershman of Baillie & Hershman, and Karin NeJame of Riefberg, Smart, Donohue and NeJame.
Posted by Peter K. Scott
We will begin this year’s Tax Tips for Transferees with a selection of quotations illustrating why the average taxpayer (including transferees) approaches the tax filing season with trepidation.
“The United States is the only country where it takes more brains to figure your tax than to earn the money to pay it.” Edward J. Gurney
“All the Congress, all the accountants and tax lawyers, all the judges, and a convention of wizards cannot tell for sure what the income tax law says.” Walter B. Wriston
“The trick is to stop thinking of it as “your” money.” Revenue Auditer
In the interest of assisting more transferees to prepare “smart” returns, join the convention of wizards, and keep more of “their” money, here are Worldwide ERC®’s annual tax season filing tips for transferees.
Here are several items deductible as moving expenses that are sometimes overlooked:
Tips to the moving van driver or helpers.
Mileage for driving second or third cars to the new location (in addition to the first car). The deduction for 2015 is 23 cents per mile. (The deduction will decrease to 19 cents per mile for 2016).
Lodging expenses in the departure location for one night after the household goods are packed, and one night in the new location on the day of arrival.
Moving household goods from a location other than your main home, up to what it would have cost to move them from the main home
Storage of household goods for up to 30 days, including the cost of moving the goods into and out of storage. Note that the costs for moving the goods into and out of storage remain deductible even if the goods are in storage more than 30 days.
Expenses not reimbursed by your employer, such as extra crating, shipment of unusual items, tips to van line staff, etc.
And remember: You don’t have to itemize to deduct moving expenses.
Other filing season tips:
If the seller of your new house agreed to pay part of your mortgage points instead of reducing the sales price, IRS says you can deduct those points, even though the seller paid them.
If you ever refinanced your mortgage, don’t forget to deduct the entire remaining balance of points paid on the refinancing in the year you sell your home.
If your new job is for a different employer, and you earned more than $118,500 in 2015, you may have had too much deducted as contributions to Social Security. You can take a credit for the excess over $7,347.00 on line 71 of your Form 1040 tax return. However, you may still owe the additional 0.9% Medicare tax that went into effect in 2013 if combined wages from both employers exceeded $200,000, or if your wages combined with those of your spouse exceeded $250,000. In such a case, you will need to file Form 8959 to report the additional tax, which applies to amounts in excess of the thresholds above, and include it on line 62 of the Form 1040.
If you moved to one of the states with state and local sales taxes but no general income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming) you may benefit from an itemized deduction for state sales taxes. The deduction, which had been temporary and expired after 2014, was reauthorized and made permanent by Congress at the end of 2015.
If you paid a premium for mortgage insurance, you may be entitled to an itemized deduction as mortgage interest for the portion of the premium allocable to 2015. This deduction, which had expired after 2014, was renewed by Congress for 2015 and 2016 at the end of 2015. No deduction is available, however, if your adjusted gross income is more than $110,000.
If you claimed a homebuyer credit on your purchase of a home in 2008 through 2010, and you sold your home or stopped using it as your principal residence when you were transferred in 2015, you may have to repay on the 2015 return the credit taken. See IRS Form 5405 and its Instructions for details. Repayment is always required for credits taken in 2008. However, for credits claimed in 2009 and 2010, repayment is only required if the home ceased to be your principal residence within 36 months of its purchase, which would not be the case if you were still living in it in 2015.
If you sold your home to your employer or a Relocation Management Company as part of your transfer, and that buyer paid interest on your mortgage before paying it off, the interest you did not pay may be included on the Form 1098 you receive from your lender, but is not deductible by you. Be sure to compare the amount shown on the Form 1098 to your records of your own interest payments.
If the sale of your former principal residence was a “short sale,” and you were relieved of some of the mortgage debt by your lender, you may receive a Form 1099-C reporting that debt relief to the IRS. However, a provision of the tax code excusing tax on such relief for acquisition mortgage debt up to $2 million was extended through 2016 in late 2015, and no tax should be due.
Because Friday, April 15, is a holiday in the District of Columbia, the 2015 return will be due on Monday, April 18, 2016, except for taxpayers in Maine and Massachusetts, who will have until Tuesday, April 19, because of Monday holidays in those states.
Posted by Peter K. Scott
The rates are based on an annual study of fixed and variable costs of operating an automobile conducted for the IRS by an independent contractor. The rates for business and moving differ because the rate for business use includes fixed costs such as depreciation, which are not allowed as medical or moving deductions. Both rates include variable expenses such as fuel. Taxpayers are also allowed to deduct items such as parking and tolls in addition to the standard mileage rate.
Use of the standard deduction rates is optional; taxpayers are always free to determine their own actual costs of operating a vehicle. However, such costs must be substantiated through detailed records, while the use of the standard rates avoids any need to substantiate the underlying costs incurred, although taxpayers must still maintain records of the miles driven and the purpose of each trip.
Notice 2016-1 also provides amounts by which taxpayers using the standard business mileage rate must reduce the basis in their automobile for depreciation that is included in the standard mileage rate. Those amounts are 23 cents per mile for 2012 and 2013, 22 cents per mile for 2014, 24 cents per mile for 2015, and 24 cents per mile for 2016.
Some companies use mileage rates higher than the standard rates to reimburse business travelers or transferees. In such cases, the excess amounts are treated as taxable wages, and are subject to withholding and payroll taxes. Amounts up to the standard mileage rates are excluded from the income of the employee. An employee cannot deduct moving expenses using the business travel rate. See Adamson v. Commissioner, 32 T.C.M. 484 (1973).
Generally, the rates the IRS announces in November or December remain in effect during the entire following year, regardless of changes in underlying costs. However, in 2011 the IRS changed the rates in mid-year due to a dramatic rise in fuel costs, the third time in six years in which it had done so. Although the dramatic drop in fuel costs did not cause IRS to lower the rate during 2015, it has now done so for 2016.