RSC Expense Management & Tax Compliance 3

Question 1

A relocation policy includes a 'repayment agreement' clause. When is this clause typically triggered?

Accepted Answer

When an employee voluntarily leaves the company within a specified period after relocating

Answer

Repayment (or 'clawback') agreements require employees to repay relocation costs if they voluntarily resign within the agreed-upon period, typically 12–24 months.

Question 2

What is the 'supplemental rate' method of federal income tax withholding, and why is it commonly used for relocation payments?

Accepted Answer

A flat withholding rate (currently 22%) applied to supplemental wages like bonuses and relocation

Answer

The supplemental rate (22% for most employees in 2024) is a flat federal withholding rate applied to supplemental wages including taxable relocation benefits.

Question 3

A company reimburses an employee $8,000 for house-hunting trips and temporary living. Under current law, how should this be treated on the payroll?

Accepted Answer

Included in wages and subject to payroll taxes

Answer

Post-TCJA, house-hunting and temporary living reimbursements are included in taxable wages and subject to both income tax and FICA withholding.

Question 4

Which term describes the method of calculating gross-up where the gross-up itself is also subject to tax, requiring an iterative calculation?

Accepted Answer

Gross-up on gross-up (pyramiding)

Answer

Pyramiding or 'gross-up on gross-up' accounts for the fact that the gross-up payment is itself taxable income, requiring multiple iterations to arrive at the correct net amount.

Question 5

An employee's relocation package includes a $5,000 lump sum. The employee spends only $3,000. Under a typical lump-sum policy, what happens to the remaining $2,000?

Accepted Answer

The employee keeps it; no accounting is required

Answer

Lump-sum policies allow employees to retain any unspent funds, providing flexibility but placing budget risk on the employee.

(RSC) Relocation Specialist Certification Practice Test

(RSC) Relocation Specialist Certification Practice Test

RSC Expense Management & Tax Compliance 3