Conference 7.286::digital

> And regardless of the relo
> benefits and the "tax adder", you will pay extra taxes, in the form of higher
> marginal rates.  You will likely be pushed into a higher tax bracket, and your
> percentage of deductions will be lower.

        If the relocation expenses push an employee into a higher tax
        bracket, that doesn't cause the employee to pay higher taxes. 
        The employees non-relocation income will be taxed at the same
        rate that it would be if the employee didn't move.

        For example, if the expenses cause the employee's income to be
        $2000 higher than the start of the 33% bracket, only the last
        $2000 will be taxed at 33% (the rest of the income will be taxed
        at the rate of the lower bracket) and the tax adder should cover
        the 33% tax on the $2000.

        Sure, the tax adder won't be exact, but if it is way off then
        the employee can, if they push, get Digital to increase the tax
        adder.  If I remember correctly, there is a note in this
        conference (or an earlier version) where an employee complained
        that their tax adder was too low, and a reply states that
        Digital later paid the employee an additional tax adder.

> In effect the company pays a 33% tax on the
> business expense of moving people to where they are needed. 

        This is true.  Digital also pays the 25% (roughly) Federal and
        State income taxes on my income, the real estate tax on my
        house, and the sales tax on any items I purchase.  There is no
        explicit tax adder, but I would work for less (and Digital would
        have offered to pay me less) if it hadn't been for those taxes.

        Taxes are just part of doing business.  If Digital wants to move
        an employee, then Digital should pay for all expenses of moving
        the employee.  I do agree with part of your thesis:  Digital
        shouldn't move people as a lark, it should only do it when it is
        beneficial to the corporation, even when the cost is considered.

        					B.J.

    Some states (e.g. Massachusetts) do not allow you to deduct moving
    expenses, so the tax rates in .0 would bw higher.

    I moved a few years ago and did, indeed, receive a form from the
    company to calculate if the tax adder was sufficient. As I recall,
    the algorithm was
    	Calculate what your taxes would have been if you hadn't relocated.
    	Subtract that from what you really paid to get the "additional tax".
    	Compare the "additional tax" liability with the amount of the
	    tax adder.
	If the difference is more than X dollars, submit this form.
    
    Since, I don't have the figures in front of me, I don't remember
    what X was, but I think it was around $100.  This worked for me
    and I got an additional $900.

    But since there's a brand new relocation policy (just like the new
    security/notes policy) announced in LiveWire, it's possible that
    this option may no longer be available. I don't know.
    
    And yes, relocations ARE expensive to Digital.

If all else fails, there's income averaging. When I finished grad
school, my income went from $5000/year to $20,000/year the first
year. During grad school, we were living on my spouse's income of
$15K/year. Needless to say, income averaging sure helped.

Besides relocation, you may have a profit in the sale of your old
house. That's taxable also unless you buy another house of equal
or higher value.

Cal

    re: .4
    
    Income averaging went away as part of the 1986 reform measures.
    
    Al
    

>    Income averaging went away as part of the 1986 reform measures.

...and was never(?) applicable to averaging over periods where the potential
averager was a full-time student.