Dear taymeg,
Thank you for your question.
Can you tell me: was this housing mandatory by the employer?
When you went to work for them, did they provide relocation allowances and a relocation package?
Were the temporary housing expenses part of the relocation package?
Did you sign a payback agreement for the relocation package?
Did you resign or were you fired?
Can you tell me the figures in all the boxes of the W-2?
The temporary housing was temporary and funded by the employer until I sold my home in Texas. I had to sign a one year contract that would make me responsible for the expenses if I left in the first year. The bottom fell out of the housing market so I had to leave and return to Texas to my home I owned. I researched the expenses before I resigned. The expenses came to $18K for relocation and the temporary apartment. Turns out the company claims they paid a 3rd party a premium that totaled $35K for the expenses. The temporary housing was part of the relocation package. I explained to the company that this was too much for my family. We had to pay for the home in Texas. We also had invested additional $11K out of pocket for repairs (AC broke while we were gone) and upkeep on the home in Texas during this time period. Here are the figures on the W2: Wages (box1) $10733, fed tax (box 2) $2683, social wages (box 3) $10733, social taxes (box 4) $665, medicare wages (box 5) $10733, medicare tax (box 6) $155, NY state wages (box 16) $10733, and state tax (box 17) $788. Also, I did not get any sign on bonus. I did not receive any additional allowances. The covered the expenses to get my family to New York and the temporary apartment. These were billed directly to the company. This would have only cost me $18K had I paid out of my pocket. Now it is costing me $35K, not to mention the cost I incurred for my home in Texas. I hope the $35K may be deductible. Thank you for your support
Dear XXXXXXX,
Thank you for this infomation it helps. however I appreciate your patience as I get additional information to make sure I am able to accurately answer your question.
The big issue here is that I need more detail about your payback agreement.
Most agreements like that state that if the company terminates you or you leave through no fault of your own, that you do not have to pay it back. The protection is if you left voluntarily on your own, through residntion or if you were fired for cause.
Can you tell me more about the payback conditions or scan and save them as a jpeg file and upload them in this text box so I can read them.
I am about to give you actual dollar amounts. I was using estimates last night. I did give you actual amounts on the W2. I do have a copy of the final agreement letter from the attorney. The attorney recaps the relocation agreement. I don't have a scanner. I will try to re-type his letter. I think this will help. Here is the attorney final agreement letter. This agreement is made and entered by John and B,B, & B. Whereas, John was employed by BB&B, pursuant to an offer letter/relocation agreement ("relocation agreement") in which John agreed to fully reimburse BB&B for various expenses associated with this relocation and move, if he terminated his employment with BB & B after having worked for BB & B less than one year; and
Whereas, because John terminated his employment after having worked for BB&B for less than one year, he owed BB&B a total of $29,862 pursuant to the relocation agreement; and
Wheras, John has made a partial payment of $15,000 but still owes BB&B the amount of $14,862; and
Whereas, the parties desire to amicably resolve any issues between them relating to the amount owed;
Now, therefore, in consideration of the foregoing and other good and valuable consideration, the parties agree as follows:
1. John agrees to pay BB&B $6,000 by providing BB&B three checks in the amount of $2,000 each, within five business days
2. BB&B agrees to deposit each check according to the following schedule
3. BB&B hereby releases John from payment of the remainder of the amount owed, $8862
4. John understands and agrees that the release set forth in paragraph 3 herein shall be null and void if any of the checks deposited in accordance with the schedule set forth in paragraph 2 herein are returned for insufficient funds and/ or otherwise do not result in full payment to BB&B.
Does this final agreement letter from the attorney assist you? If not, let me know and i will find the relocation agreement when I get home. You now have all actual dollar amounts. I thought I should stop using estimates based on your questions. I am in retail. This relocation agreement is common in other retailers. You are responsible for relocation expenses if you leave in the first year. Fired or resign. I resigned in this case because of the housing market in Texas. I have never heard of any company trying to get such a large amount for only 5 months of corporate housing. For example, this apartment was listed at $2200 a month in the front office. We had to empty out our savings to pay this back. We had to go on a payment schedule on the final amount paid. I hope we can write off some amount. Again, thank you and let me know if you need the actual agreement. I will find it if it is necessary.
Dear Taymeg,
Thank you for your very detailed responses.
I was really concerned about the conditions of your leaving the job. The language you are using seems very vague. None the less, I should leave that part to you and your attorneys.
Normally you would only be required to reimburse the employer if you RESIGNED or were fired for cause. AND there would be langaugage about it being your fault.
You are going to be able to take some deductions, but it would be more if you were fired as apposed to resigning.
so for any amount of the relocation that was a relocation bonus or previously taxable to you on form W-2, you can take a deduction subject to the 2% floor on schedule A.
An amount paid by a taxpayer as liquidated damages to a former employer...qualifies as a business loss under section 165(c)(1) of the Internal Revenue Code of 1954 where such amount is attributable to compensation received and reported for services rendered. Such amount is deductible, however, only if the taxpayer itemizes his deductions.
REFERNCE: Rev. Rul. 67-48 1967-1 C.B. 50
NOTE: if you incurred attorney fees in reaching this settlement you can also claim the attorney fees on schedule A.
Tax Preparer
GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee