Presentation and slides from 2013 Global Relocation Conference by Quentin Hormel.

2. Payback Agreements –
How to Collect and Tax
Concerns

3. • Taxables, excludables, and business
expenses.
• Third-party homesale expenses?
• Executive paybacks and Sarbanes-Oxley?
Paybacks do not create a “loan”.
• Payback applied proportionately among
expenses.

4. • $10,000 excludables
• $1,000 box 12-p excludables
• $15,000 taxables
• $14,000 third party homesale costs
• $40,000 total expenses
• $20,000 payback (50% of total expenses)

5. • $5,000 excludables (50% of $10,000)
• $500 box 12-p excludables (50% of $1,000)
• $7,500 taxables (50% x $15,000)
• $7,000 third party homesale costs (50% x
$14,000)
• $20,000 payback (50% of total expenses)

6. • W-2c for year of original reimbursement.
• Do not touch boxes 1-2 on W-2c.
• Only adjust boxes 3-6 on W-2c.
• Company should refund SS & Med
overpayments and obtain signed affidavit
from employee.
• Report adjustment on 941-X or 944-X to
recover SS and Med taxes.

7. $7,500 taxables (50% x $15,000)
W-2c:
• Total Medicare Wages (Boxes 3 & 5)
-$8,121.28 ($7,500 + SS/Med W/H)
• Soc. Sec. Withholding (Box 4)
-$503.52 ($8,121.28 x 6.2%)
• Medicare Withholding (Box 6)
-$117.76 ($8,121.28 x 1.45%)-

8. • Employee should not file an
amended tax return.
• On current year’s return, an
itemized deduction on the
Schedule A to retrieve Federal
withholding, subject to 2% floor.
• Best not to give guidance to
employees – “consult tax advisor”.

9. • Apply adjustments to all earning
and withholding boxes for the
current year.
• “Wage-offset method” should be
followed, not “claim-of-right
method”.

10. • IRS Publication 525 (page 33 of 2012
edition) and Publication 17 (pages 83
& 200 of 2012 edition).
• IRS Publication 15 – Circular E (page
34 of 2013 edition).
• Revenue Rulings 67-48 and 79-311.
• Private Letter Rulings 9050053 and
9313015.

11. Thank You!
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