BVO backup payment

[schirallicpa]

I had not run into this term before: BVO Buyer Value Option. From what I am finding on the internet, this is when the realty company, or some other middle man, takes care of commissions and closing costs on an old home when a employer is relocating an employee. Now, it is also my understanding that those types of costs work into the basis calcs of homes, but usually do not make there way to the tax return when the home is non-business.

Ok = this guy has a "moving expense report" from his employer. It lists among other things BVO backup Payment of $16990. It is listed as a taxable item. It is subtotaled with other items and then grossed up. He says this amount is included in his W2. However, there is no amount in box 12 and no code P.

So if this amount is paid to someone for something, and he's taxed on it, does he get to deduct it anywhere? I'm deducting some of the other items on this list, such as storage and moving expense. But I'm new with BVO, and just looking for someone elses input on it.

I guess I would think that if this amount was used by the employer to help sell the guy's house and get him out here, it wouldn't be taxable. From what I was reading, it was supposed to be a benefit to entice moving, not something to hit the guy with later. The gross up on the report on this amount (16990) is $11352! So it appears that this amount is adding $28342 to his W2.

I guess I'm confused.

anyone got 2 cents out there today?

[schirallicpa]

Nobody liked my question. I'm bumping it up again.....

[Lion EA]

The employer can pay anything to an employee, but most things will be taxable compensation to him. If the employer pays as compensation something that is deductible to the employee, the employee then deducts. For moving expenses, it's pretty much limited to moving his stuff and moving his family. That's why the employer pays taxes on the non-deductible items, grosses them up. Looks like a huge W-2, but the employee did not actually pay in all those withholding taxes, his employer did on his behalf, well within the circular formula used to calculate them.

[Lion EA]

And, if the employer paid the deductible items directly to the moving company, for instance, and did NOT include them in the W-2, then the employee might have nothing left to deduct on his return.

[schirallicpa]

The employer paid the moving company. This is part of the amt included in the W-2 and grossed up. Isn't that deductible?

If I the employer give you a salary and tax it, then you the employee pay the moving company to move you, you get the deduction.

So if I the employer pay the moving company, and then call it your salary, isn't that the same thing?

It hasn't been identified as reimbursed moving expense on the W-2.

Maybe I need more coffee.....

There should be a Sec 125 type plan for moving!

[Lion EA]

If the employer put his payment to the moving company on the W-2, then your client deducts it. If your employer did NOT put that particular payment on the W-2 (and there's no reason to put it on the W-2 since it's a tax deduction), then your client does not deduct it because he's already gotten a tax-free benefit. Did the employer put both taxable and non-taxable items on the W-2 or did he separate them out on the report you have and only gross up and include the taxable items on the W-2?

[JohnH]

The employer paid the moving company. This is part of the amt included in the W-2 and grossed up. Isn't that deductible?

If I the employer give you a salary and tax it, then you the employee pay the moving company to move you, you get the deduction.

So if I the employer pay the moving company, and then call it your salary, isn't that the same thing?

It hasn't been identified as reimbursed moving expense on the W-2.

Maybe I need more coffee.....

There should be a Sec 125 type plan for moving!

Are you sure the expense paid by the employer to the moving company is grossed up on the W-2? That would be highly unusual, especially since these relocation companies promote their services partly on the basis that they know how to handle these things from a tax standpoint.

I've never seen a statement from this particular company, but I have seen a few that were a little hard to read. And I believe the only reason the moving expense would be grossed up would be in a case where the moving expense didn't qualify as being tax deductible in the first place.