Question about a Check

[Knoxville]

If some of you have been keeping track, I'm in the process of changing jobs. I was happy with the offer that was made to me. I had one concern, and that was that there was not an offer made that pertained to moving expenses. I spoke with the V.P. of the company and he said he would cut a check for 1000$ for moving, deposits and so forth. It's only a 40 mile move, but hey, I might as well get all that I can out of them. My question is that the HR manager said the keep in mind that the 1000$ check is reportable income. I don't understand that. Does that mean that I have to pay taxes on that or will they hold taxes out of it? Just curious what she meant by that.

Knox

[bad14u]

The $1,000 is income that you have not paid taxes on. Therefore you SHOULD report it to the IRS and pay taxes on it. If they just gave you cash you wouldn't have to because there wouldn't be a paper trail, but since they are writing a check the IRS will know about it.

[Knoxville]

Ok, thanks. I think I will have them hold out 20% of the check for taxes. That should cover most of it. I just don't want to get stuck with having to PAY at the end of the year.

[Scrumhalf]

A better option is to get the whole $1000, take away 20% and put that in a money market account that will pay you some kind of interest. It does require some fiscal discipline on your part to not touch that portion.

[imonboardtoo]

Dude, here's a more understandable explanation, maybe. The $1,000 is going to be added to your W-2 from your new employer. So when they add it as income to the payroll system, the taxes will be charged (even though they may write you a separate check for $1,000). no way around that. Uncle Sam gets taxes on relocation expenses every time.

Not a huge amount of taxes on it (Scrum's right about 20%), so you may not even see it in year-end taxes. If you're worried, save it or bump your W-4 up 1 dependent for a couple months and then change it back.

[Morgan]

Try this link

http://www.irs.gov/pub/irs-pdf/p521.pdf