Why Do Companies Use Our Services?
One Reason: Tax Benefits!
When
a corporation reimburses an employee for relocation expenses, the IRS
treats the reimbursement as ordinary income, taxing it at the rate
dictated by the transferee's tax bracket. Only the cost of transporting
the family and its household goods to the new location is exempt from
being taxed.
Third party-home purchase companies like Cross Country, however, allow corporations to avoid the expense of "grossing-up" their transferees' relocation packages. In Ruling 72-339, the IRS stated that if a third party company purchases an employee's home and disburses the transferee's equity, any expenses incurred in the sale of the property are then incurred by the third party company - not by the employee. Since the corporation reimburses the third party company rather than the employee for the selling expenses, the IRS does not regard the reimbursement as income to the transferee. Usually, this tax savings significantly exceeds the management fee charged by the third party company for handling the transaction.
| Tax Savings Example | |||
| Sale Price | 100,000 | 150,000 | 200,000 |
| Expenses* (Taxable Gain) |
8,000 | 11,500 | 15,000 |
| x .40 Tax Rate (Potential Gross-up for State and Federal) |
3,200 | 4,600 | 6,000 |
*Expenses do not include the buying side of the transaction, only the selling side. (Normal selling expenses include: commission, deed fees, title insurance, attorney fees, recording fees, inspection fees, and courier fees.)
Cross Country not only helps save your company money, but also provides a centralized source of information, help and expertise for your employee's move, from start to finish. Cross Country Relocation provides service twenty-four hours a day, seven days a week, helping to make the transition as smooth as possible for your employees.