CRP Financial and Tax Aspects of Relocation

Question 1

Under current U.S. tax law, which moving-related expenses paid by an employer are taxable to the employee?

Accepted Answer

Most employer-paid moving expenses, as the exclusion was suspended for civilian employees by the Tax Cuts and Jobs Act of 2017

Answer

The TCJA suspended the moving expense deduction and exclusion for civilian employees through 2025, making most employer-paid relocation benefits taxable income.

Question 2

What is 'gross-up' in relocation compensation?

Accepted Answer

Additional payment from the employer to cover the taxes owed by the employee on taxable relocation benefits

Answer

Gross-up ensures the employee's take-home pay is not reduced by taxes on relocation benefits; the employer covers the tax obligation on top of the benefit amount.

Question 3

Which IRS form reports taxable relocation benefits paid to an employee?

Accepted Answer

Form W-2

Answer

Taxable relocation benefits are reported as wages on the employee's W-2, making them subject to income tax and payroll taxes.

Question 4

What is a 'lump sum' relocation benefit?

Accepted Answer

A one-time payment to the employee to manage their own relocation expenses

Answer

A lump sum provides the employee a fixed dollar amount to self-manage relocation, offering flexibility while capping employer cost.

Question 5

Which method calculates gross-up based on the employee's marginal tax rate applied to the net benefit?

Accepted Answer

Supplemental method

Answer

The supplemental method applies federal and state supplemental withholding rates to the relocation benefit to calculate the gross-up amount.

CRP - Certified Relocation Professional Practice Test

CRP - Certified Relocation Professional Practice Test

CRP Financial and Tax Aspects of Relocation