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Tax Withholding Question

T

txrandom

Diamond Member
I'm taking next spring off and doing an internship in Houston. Unfortunately the commute from my parents home in Houston is about an hour. Fortunately I get a relocation bonus of $4000 from the company, but I think I only get it if I actually move. I don't really want to commute an hour one-way every day anyways. I'll just come home on the weekends or go back to College Stations.

So how much of that $4000 will I actually see on my first pay check? I'm not really knowledgeable on tax withholding. Since I'm a student and won't be making that much money this year, will I see more than normally?

I ask because rent is pretty expensive in the area I'll be living, and it may be better for me to just live with my parents and suck it up for the commute.
 
Ask the HR dept of the company. I'm assuming they will only reimburse your actual relocation costs up ti $4000 and you need to provide receipts for it.
 
I got a $4k signing bonus for my current job. Uncle Sam took a nice 40% chunk of that. Not sure how my current income played into that though.
 
Originally posted by: Bignate603
I got a $4k signing bonus for my current job. Uncle Sam took a nice 40% chunk of that. Not sure how my current income played into that though.
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My gain sharing checks were considered by the IRS as a one time special payment and taxed at the highest rate...@ 40%.

Least, that's what I was told.
 
Originally posted by: Capt Caveman
Ask the HR dept of the company. I'm assuming they will only reimburse your actual relocation costs up ti $4000 and you need to provide receipts for it.
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I was wondering about taxes... I'll get $4000 from the company no matter how much the actual relocation is as long as I actually relocate.
 
There is probably some note about the company will pay the tax on relocation expenses. At least that's how it worked with for me. My relocation expenses that were reimbursed and my lump sum was tax free since the company paid taxes.

But yes as mentioned, for sign-on bonuses, you pay the tax, 40% in my case as well (although I've heard I'll get some of it back, making it about 30% I believe).
 
figure that 40% above; it's technically withheld as if your salary would be $4000 x 26 for the year, plus any other income you made in that period.

It's really not lost though...at the end of the year you get back whatever you didn't owe.

I haven't see this done like that though...since it's taxed you are screwed in a way. I have always seen this as submitting expenses and getting reimbursed. If paid it's income not an expense.
 
Originally posted by: duragezic
There is probably some note about the company will pay the tax on relocation expenses. At least that's how it worked with for me. My relocation expenses that were reimbursed and my lump sum was tax free since the company paid taxes.

But yes as mentioned, for sign-on bonuses, you pay the tax, 40% in my case as well (although I've heard I'll get some of it back, making it about 30% I believe).
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Yah, I heard sign-on bonuses were taxed at the highest rate. So is a relocation lump sum considered a sign-on bonus?
 
Bonuses are federally taxed at 25%, plus FICA. Since you're in Texas, no state income tax. Now if this is relocation reimbursement, it may not be taxed at all (or they may gross it up). It is still taxable income, however. Need to contact your HR department and see how they are classifying the income.

BTW, what are of Houston will you be in?
 
Originally posted by: CPA
Bonuses are federally taxed at 25%, plus FICA. Since you're in Texas, no state income tax. Now if this is relocation reimbursement, it may not be taxed at all (or they may gross it up). It is still taxable income, however. Need to contact your HR department and see how they are classifying the income.

BTW, what are of Houston will you be in?
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Right, but relocation payment most likely has strings attached on actual payment regardless of withholdings.

Sounds like OP is not moving, hence no relocation payment.
 
Originally posted by: spidey07
Originally posted by: CPA
Bonuses are federally taxed at 25%, plus FICA. Since you're in Texas, no state income tax. Now if this is relocation reimbursement, it may not be taxed at all (or they may gross it up). It is still taxable income, however. Need to contact your HR department and see how they are classifying the income.

BTW, what are of Houston will you be in?
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Right, but relocation payment most likely has strings attached on actual payment regardless of withholdings.

Sounds like OP is not moving, hence no relocation payment.
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I agree.
It does sound like the OP is not moving and is just trying to get a free $4000 check from his new company.
 
Originally posted by: Lothar
Originally posted by: spidey07
Originally posted by: CPA
Bonuses are federally taxed at 25%, plus FICA. Since you're in Texas, no state income tax. Now if this is relocation reimbursement, it may not be taxed at all (or they may gross it up). It is still taxable income, however. Need to contact your HR department and see how they are classifying the income.

BTW, what are of Houston will you be in?
Click to expand...

Right, but relocation payment most likely has strings attached on actual payment regardless of withholdings.

Sounds like OP is not moving, hence no relocation payment.
Click to expand...

I agree.
It does sound like the OP is not moving and is just trying to get a free $4000 check from his new company.
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Which means that he should get hit with the 25% fed withholding, unless his company is made out of morons.
 
I'm actually moving. I've already contacted a few realtors to find an apartment near the Galleria area. It's going to be more expensive than College Station, but with the relocation lump sum and short commute time, it will make up for it. Those two hours a day in commute time can be put towards making some good money with design work.

Where does it sound like I'm not even moving? I only get the relocation if I actually move...
 
Originally posted by: txrandom
I'm actually moving. I've already contacted a few realtors to find an apartment near the Galleria area. It's going to be more expensive than College Station, but with the relocation lump sum and short commute time, it will make up for it. Those two hours a day in commute time can be put towards making some good money with design work.

Where does it sound like I'm not even moving? I only get the relocation if I actually move...
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No wonder why your rent will be expensive. Houston has a pretty good bus service for out in the suburbs. It takes me 40 minutes to get to work from Katy. Oh, and Galleria traffic is horrendous at all hours of the day.
 
Yah, there is a bus that goes from Kingwood to Downtown, but then I'd have to switch over to another bus to get to the Galleria area. The relocation should easily pay for my rent. And then based on how cheap I go, it could cover my electricity and internet. I'll still be making a fairly good wage anyways though, so the costs won't be a big deal. I don't mind driving the commute, it's just the time I'd be wasting. I guess I could get a wireless internet car and use my laptop on the bus. 🙂
 
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