Tax Gross-Up Audits

We determine the gross-up value by assessing the additional income taxes a transferee would owe both with and without the relocation. If the difference is positive, it’s adjusted upward for the present year’s taxes.

Our tax experts review the transferee tax returns to verify the employee’s estimated taxable income used in calculating the gross-up itself, and that the income used is aligned with corporate policy.

A tax gross-up moving expense refers to an additional payment an employee receives to cover the tax liabilities associated with relocation-related reimbursements or benefits provided by their company. When employees relocate for work purposes, certain relocation expenses, such as shipping belongings, travel costs, or housing allowances, might be reimbursed by the employer. However, these reimbursements can be considered taxable income in many jurisdictions.

To ensure employees receive the full intended benefit of these reimbursements without being burdened by the additional taxes, the employer may gross-up pay the amount on the employee’s behalf. This means they calculate the tax owed on the reimbursement and then increase, or gross-up pay to relieve the tax burden. The end result is that the employee receives the full value of the reimbursement after income taxes.