With new IRS regulations that became effective January 1, 2018, all relocation expenses incurred on or after that date are considered taxable income and subject to applicable income and employment taxes. This policy is currently being revised to reflect this new law.
It is the policy of the University of Wisconsin System and the Office of the State Employment Relations to allow institutions to reimburse relocation and related temporary lodging expenses for new and presently employed personnel assigned to new locations by transfer or promotion. Refer to Section IV for guidance involving living expenses in connection with a temporary or indefinite work assignment away from the employee’s permanent work site which does not involve a household move.
Chapter 230.047, Wisconsin Statutes, authorizes state agencies and the University of Wisconsin System to participate in the temporary interchange of employees between and among government agencies at the same or different levels of government and with institutions of higher education. Typical interchanges involving the University of Wisconsin System are with other state agencies, federal agencies, other government agencies such as school districts, and other universities outside the University of Wisconsin System. (See UW System Administrative Policy 324 (SYS 324), Inter-Institutional Financial Transactions for the temporary interchange of employees within UW System.)
UW System Travel Policies govern applicable and allowable travel-related expenses.
Within the constraints set forth above, and at the discretion of each institution, reimbursement of relocation expenses of new, re-employed, or presently employed employees assigned to new locations by transfer or promotion in the classified or unclassified service, including faculty, may be authorized. Reimbursement is not authorized for employees appointed as limited term employees (LTEs). Provisions in negotiated collective bargaining agreements prevail for employees covered by such agreements.
- Reimbursement of expenses is mandatory when the appointing authority requires the employee to change residence location because the employee is:ordered to relocate, or
promoted to a different position in the civil service, and the appointing authority whose institution will be the employer determines that the relocation or promotion requires the employee to change residence.
- Reimbursement is on a permissive basis at the discretion of the new appointing authority for an employee who requests a transfer or demotion and relocates as a result.
- Reimbursement of expenses is on a permissive basis, as recommended by the appointing authority, for a person reporting to his or her first place of employment in state civil service or reporting upon reemployment after leaving the civil service.
- Reimbursement for an employee’s relocation expenses can be allowed if the distance between the new place of employment and the old residence is at least 35 miles farther than the distance between the old place of employment and the old residence, and the distance between the new and old residence is at least 35 miles.
If the appointing authority determines that a relocation is a mandatory condition of employment under s. 20.917(1)(a), Wis. Stats., the minimum distance requirements are not applicable.
- No more than two relocations may be reimbursed to an employee in a calendar year.
- Unless otherwise authorized by the appointing authority, to be eligible for moving reimbursement, the employee must move no later than one year from the effective date of the appointment or the end of probation, whichever is later.
- New employees or former employees reporting upon reemployment will be allowed reimbursement when approval is granted by the Chancellor or delegated designee. A commitment to the prospective new employee should not be made prior to the Chancellor’s or delegated designee’s approval.
- It should be determined whether it is in the best interest of the UW to provide reimbursement for relocation and travel expenses. The following circumstances should be considered:
- Are the individual’s skills in critically short supply? If yes, is payment usually available from competing employers?
- Is the labor market tight for this particular position?
- Does the individual rank above all other candidates in a combination of training, experience, and personal qualities?
- Will the best qualified individual for the position be unable to accept the institution’s offer for financial reasons unless relocation expenses are paid?
B. Reimbursable and Non-Reimbursable Costs
1. Household goods are personal effects of the employee and the immediate family of the employee.
Examples include furniture, clothing, musical instruments, household appliances, food, and other items which are usual and necessary for the maintenance of a household and which may be transported legally in interstate commerce.
The following items are NOT considered household effects:
- property for resale
- property not owned by the family
- farm equipment
- boats over 14 feet
- automobiles, motorcycles, recreational vehicles
- building materials
- items used in a personal business
- pets, flammable items, caustic aerosols, spoilage items, plants, jewelry, frozen food, etc., and other items that might be found in a household but which the carrier cannot or will not allow to be placed in the moving van
- swing sets, jungle gyms, and other similar outdoor items
The cost to move any of the above-mentioned or similar type items would be considered “incidental costs” (explained under Section III, B.3.). Any other items that might be considered questionable should be cleared with the Institution Business Office.
2. Direct Costs of Relocation
The following direct costs associated with the relocation of household goods are reimbursable, subject to the constraints in Section II.
- linehaul (rate per 100 lbs. x pounds moved)
- seasonal rate adjustment
- weight and bulky articles charges except for items listed in Section III, B.1. above
- third party services associated with crating, uncrating, assembling, or disassembling typical household items such as a pool table, appliances, clocks, hot tubs, plasma televisions, etc. (See exception in Section III, B.3. below.)
- ferry, bridge, ramp; service charge
- appliance service
- additional transportation at origin and destination
- fuel/insurance surcharge (this is not a change the employee has control over)
3. Incidental Costs of Relocation
Payment of a stipend is allowed in accordance with s.20.917(1)(e), Wis. Stats., to cover incidental costs of relocation. Eligibility for a stipend applies to all types of moves (household moving carrier, self moves, or mobile home move). The maximum amount of the stipend is currently $1,000. for mandatory moves, the employee shall receive a stipend equal to the maximum amount. For permissive moves, the employee may be granted a stipend of any amount up to the maximum. A stipend may not be paid more than 30 days prior to the employee’s relocation date.
IRS rules determine whether all or part of the stipend is taxable to the employee. Generally, if the expenses that are paid from the stipend are deductible moving expenses and the employee provides documentation to the employer on these expenses, then the stipend (or portion of the stipend associated with the documented deductible expenses) is not taxable. If the employee provides no documentation on how the stipend is used, the stipend should be treated as taxable to the employee. (Reference Section III, C.4. for more information regarding taxability of stipends.)
The following incidental costs associated with a move are NOT reimbursable as a direct cost of the move but may be covered by a stipend, if granted by the appointing authority:
- exclusive use/space reservation/expedited service charges
- house hunting
- valuation/additional insurance
- extra pickup and/or delivery of household goods
- storage for the convenience of the employee
- warehouse handling
- weight and bulky articles charges for items listed in Section III.B.1.
- auto hauling or towing (Item 130)
- travel costs en route (meals, lodging, tolls, etc.)
- overtime loading or unloading required by customer (Item 175)
- weight and bulky article charges for items listed in Section III, B.1.
- third party services for swingsets, jungle gyms, and other outdoor items
- other costs associated with the move that are not considered household effects
4. Transporting the Employee and Family
The amount of reimbursement for transporting (this includes flying) the employee and his or her immediate family from the former residence to the new place of residence may not exceed the cost of mileage for one automobile at the rate specified in UW System Administrative Policy 425 (SYS 425), Use of Personal Vehicles, Rental Cars and Fleet for Business Transportation . The maximum allowable mileage reimbursement shall be based on mileage using the most direct route and shall not exceed the mileage indicated on the bill of lading when a commercial carrier is utilized. MapQuest and Google Maps are the standard tools for calculating mileage. Necessary airfare purchased in accordance with UW System Administrative Policy 410 (SYS 410), Purchase & Payment of Business Air Travel may be reimbursed for overseas relocation.
5. Piecemeal Moves
The appointing authority may approve reimbursement for piecemeal moves necessary to transport the employee’s household effects from the former residence to the new residence. The total cumulative reimbursed cost of moving household effects on a piecemeal basis may not exceed the amount which would have been charged if the relocation had been accomplished in one trip. To make that determination, an estimate showing the cost to accomplish the move in one trip should be obtained.
6. Relocating Without a Commercial Carrier (Self Moves)
Should the employee elect to relocate himself or herself, reimbursement for such a relocation is limited to the actual, reasonable, and necessary costs for any hired labor in loading and unloading the household goods and for the rental of trucks, trailers, moving equipment, or other expenses directly related to the relocation. Neither the employee nor the employee’s spouse or dependents may be reimbursed for their labor. The reimbursement claim must be supported by original receipts. Estimates are not required from commercial carriers to support self moves.
7. Mobile Homes and Foreign Relocations
The UW System Travel Office (608-263-0873) should be contacted for relocations involving a mobile home or a move to or from outside the contiguous 48 states and the District of Columbia. For foreign moves, an 18,000-pound maximum applies. Information on what is reimbursable for foreign moves can be found in section 302-7.12 of the Federal Travel Regulations.
8. Temporary Lodging in Connection with a Household Move
An appointing authority may recommend payment of a temporary lodging allowance for up to 45 days to an employee or person reporting to employment in other than on a limited term basis, if the employee or person is eligible for moving expense reimbursement, whether or not that reimbursement is granted. In addition, the employee must establish a temporary residence in his or her headquarters city. Lodging allowance payments are subject to prior approval from the appointing authority. Individual collective bargaining agreements may have specific language governing moving expenses. See the applicable collective bargaining agreement for relevant provisions.
A temporary lodging allowance will be authorized only where circumstances require the person or employee to establish a temporary residence for reasons such as the temporary need to maintain domiciles in the old and new locations or where permanent housing is temporarily not available upon moving to the work location. The days for which temporary lodging allowance is provided need not be consecutive. Therefore, it is possible for the 45 days of temporary lodging reimbursement to extend over a period of time greater than 45 days. The claim must not exceed the in-state daily lodging maximum.
The designated headquarters city of an employee should be established and changed at the time the employee begins employment at the new location.
Under current IRS rules, payments for temporary lodging are taxable to the employee. Institutions are required to withhold federal income taxes (social security) and state income taxes on these reimbursements to employees. (Refer to Section III, C.4.)
C. Institutional Responsibility
1. The recommendation of an appointing authority to pay relocation or temporary lodging expenses must be submitted in writing to the Chancellor or delegated designee for approval prior to the move, and approval is required prior to authorizing reimbursements to the employee.
If approving relocation expenses, the Approving Authority (Chancellor, Dean, Director, or Designee) must complete and approve the Approval to Reimburse Relocation Expenses and/or Temporary Lodging Form or provide the following information on an Authorization Letter using University letterhead:
- Name of relocating employee
- Reason for the move
- Position Control Number
- Amount of relocation allowance for both direct and indirect costs of move
- Rationale for payment of temporary lodging
- Amount of temporary lodging allowance and number of days
2. When approval for relocation expenses is granted, the Appointing or Approving Authority must provide the relocating employee a copy of the approved request, including the dollar amount of the costs which will be reimbursed. For permissive moves, the Appointing Authority may limit reimbursement/payment. Either the Approval to Reimburse Relocation Expenses and/or Temporary Lodging Form or Authorization Letter must be attached to all reimbursement requests.
3. IRS Publication 521 delineates moving expenses which are deductible and nondeductible for tax purposes. Nondeductible expenses are sometimes reimbursed by UW policy. Social security and medicare tax must be withheld by the UW on the following nondeductible reimbursed expenses:
- Meal costs
- Storage for more than 30 days
- Stipend payments
- Temporary lodging
- Reimbursable mileage:
- For moves that occur January 1, 2018 and after, the taxable mileage reimbursement for moves is $.545 – $.18 = $.365.
- For moves that occur January 1, 2017 and after, the taxable mileage reimbursement for moves is $.535 – $.17 = $.365.
- Campuses can refer to the to assist in this reporting.
4. Relocation expense claims must be audited for compliance with the terms of this policy.
D. Responsibility of the Employee
- Allowable costs associated with the relocation may be reimbursed to the employee or, at the discretion of the institution, paid directly to the carrier upon pre-audit of all invoices and receipts. All parties (carrier, employee, and institution accounts payable department) should have advance notification of the payment method which will be used. When payment is made directly to the carrier, sales tax, which may be assessed on containers, should be deducted. The claims must be substantiated by an itemized bill of lading, receipts for other allowable move-related reimbursable expenditures, and a copy of Approval to Reimburse Relocation Expenses and/or Temporary Lodging Form or Authorization Letter must be attached.
- When the cost of the relocation is reimbursed to the employee, the employee may request an advance of up to 80% of reimbursable costs based on the lowest estimate. Parameters concerning eligibility and dollar limits for an advance may be set by each UW institution. The advance may not be issued prior to two weeks before the move occurs. A copy of the lowest estimate and the Approval to Reimburse Relocation Expenses and/or Temporary Lodging Form or Authorization Letter must be attached to all advance requests. UW System Administration has contracts with corporate moving companies for substantially reduced rates. Employees are expected to utilize one of the contract vendors. If the employee elects not to use the UW’s contract vendors, the employee may select any carrier, but reimbursement is limited to the lowest of the three estimates. (Note: Institutions may waive the requirement for obtaining estimates in situations where the appointing authority limits reimbursement for moving expenses to an amount less than $3,000.) Caution: Scam movers abound. If one of the UW’s contract vendors is not used, go to www.movingscam.com and click on the “blacklist” to view a list of companies that have repeatedly practiced scams against consumers.
- Any unusual arrangements should be cleared with the employing department prior to making any commitments to the carrier or incurring any expense which may not be reimbursable.
- Allowable costs associated with the relocation may be reimbursed to the employee or, at the discretion of the institution, paid directly to the carrier. All parties (carrier, employee, and institution accounts payable department) should have advance notification of the payment method which will be used. When payment is made directly to the carrier, sales tax, which may be assessed on containers, should be deducted. The claims must be substantiated by an itemized bill of lading, receipts for other allowable move-related reimbursable expenditures, and a copy of the approval to pay moving expenses.
- When the cost of the relocation is reimbursed to the employee, the employee may request an advance of up to 80% of reimbursable costs based on the lowest estimate. Parameters concerning eligibility and dollar limits for an advance may be set by each UW institution. The advance may not be issued prior to two weeks before the move occurs. A copy of the lowest estimate and approval letter must be attached to the request for advance.
IV. Temporary or Indefinite Work Assignments
Reimbursements of expenses for “temporary” assignments away from the tax home are generally not taxable to the employee. If the assignment is “indefinite,” the employee is considered to have moved his/her tax home to the new work location. Reimbursements of expenses for “indefinite” travel are taxable. Rev. Rul. 93-86; Rev. Rul. 99-7.
The table below provides a quick summary of the situation, and When “Temporary” Travel Assignments Become “Indefinite” provides examples (from the IRS regulations) of “temporary” and “indefinite” travel assignments. The Internal Revenue Service looks at all of the facts to determine whether the travel assignment was intended to be temporary or indefinite. Rev. Rul. 93-86; Rev. Rul. 99-7.
|Duration(Note that an assignment changes from temporary to indefinite at the point at which the university knows that the assignment will exceed one year.)||Expected to last one year or less||Expected to last longer than one year|
|Tax Home||Permanent work site||New work assignment location|
|Meals and Lodging||Excludable from income||Taxable|
|Transportation Expenses – Mileage and Parking||Excludable from income||Taxable|
|Transportation Expenses – Commuting Mileage||Taxable||Taxable|
|Expenses related to events not located at the permanent work site or the new work assignment, such as conference travel||Subject to normal travel regulations||Subject to normal travel regulations|
Campuses should work with the campus Human Resources and Academic Personnel Offices to ensure appropriate approvals and accounting and tax related issues are addressed and in place prior to the begin date of the interchange assignments.
If UW System is the receiving agency, a requisition should be completed and invoices processed through Accounts Payable.
If UW System is the sending agency, a Fund 133 or 144 account number should be established in order to charge the receiving agency or institution for the employee’s salary and fringe benefits.
UW System employees on assignment to another agency or institution may be eligible to receive supplemental compensation in lieu of reimbursement to employees for meals, lodging, and transportation expenses, which may be paid directly to the employee with required deductions made or transferred for payment to UW System.
Supplemental compensation for periods exceeding a one-year period will become taxable to the recipient at the time the university knows the agreement will exceed one year.
In the event that assignments change from temporary to indefinite, or indefinite to temporary, triggering a change in tax-ability to the employee, Human Resources should work through the Payroll Office to ensure proper coding and tax treatment.