Lump Sum payments are a popular option for financing employee relocations but can come with their own set of challenges to manage. One of the most common challenges companies face when utilizing lump sums for relocation is contending with the tax implications via a Gross-Up payment. Gross ups are additional payments provided to the relocating employee to compensate for the employee’s additional tax burden as a result of receiving a lump sum payment. From a tax standpoint, lump-sum payments are viewed as additional income and as such increase, the amount of taxes an employee owes at the federal and, where applicable, state level as well. It can be incredibly difficult for companies to accurately calculate the correct gross-up amount they need to pay to a given employee. That is why we recommend using northAmerican van lines, gross-up calculator. This is a free resource to help companies better manage and budget for their employee relocations.
You can visit the gross-up calculator here.
The gross-up calculator is easy to use. First, start by plugging in the lump sum amount you are looking to gross up in the top box next to “Amount to Gross-Up”. Next, simply input the applicable tax rate for your state and the appropriate OASDI and Medicare tax rate for your relocating employee into their dedicated boxes. You can find a list of state income tax rates below the calculator if needed. The calculator will provide you with the total lump sum amount inclusive of the gross-up, just the gross-up amount, and a breakdown of the gross-up payment by tax type.
