Handbook of Business Procedures
9.1.11. RELOCATION EXPENSES
This policy is to establish a basis for payment of household and personal relocation expenses when The University of Texas at Austin’s funds (excluding state and AUF funds) are to be expended for the relocation of faculty or staff, who are newly hired by the university or being transferred to a new university location. The university adheres to IRS and federal regulations and guidelines. In accordance with the Tax Cuts and Jobs Act (TCJA) of 2017, all relocation or moving expenses paid or reimbursed by the University is taxable compensation to the faculty or staff member.
Expenses incurred for relocating laboratory, library/scholarly collection, or research equipment to university premises are considered ordinary and necessary university business expenses and must not be coded as relocation expenses of household and personal moving expenses. Note that this statement does not apply to moving individuals (post docs, research staff, etc.) along with another employee. Relocation and moving expense payments to each such individual transferring as part of a research lab and/or business needs of another employee are taxable to these individuals.
Expenses incurred by a prospective employee, prior to a written accepted offer of employment, are university expenses and nontaxable to the prospective employee and must be paid using the prospective employee travel object code (1270). Such prospective employee expenses may include interview trips, at which time such prospective employee may engage in activities such as house hunting, but any trip for the sole purpose of house hunting is taxable, as the case may be, to the prospective employee or employee.
Approval of the unit head of the employing department must be granted prior to making commitments to pay relocation and moving expenses. Approval of the dean or vice president, or their designee, is required if the commitment exceeds ten percent of the annual rate (academic rate plus salary supplement for faculty positions). Note: The relocating employee’s offer letter must state the amount allocated for relocation expenses and include a notice to the employee that these payments will be treated as taxable income to the employee. Pursuant to the federal United States Citizenship and Immigration Services and E-Verify, any employee receiving a relocation payment must have a completed federal Form I-9 on file with the employer prior to the disbursement of any relocation funds. This applies even if the employee will not be starting work for several weeks or months after receiving the payment.
Payments for relocation and moving expenses should normally be made in a lump-sum. Departments may continue to collect receipts if they want to limit the employee payment to the amount of actual expenses. The lump-sum payments can be made in multiple installments or as a one-time payment. Receipts do not need to be submitted to Payroll Services.
Direct payments to vendors are discouraged, but may be necessary in certain circumstances. These payments are taxable to the employee and will be flagged by Payment Services-Travel for notification to Payroll Services in order to add the amount paid as a taxable fringe on the employee’s next paycheck.
See Section F. Voucher and Documentation Requirements for more details on methods of payment.
Relocating employee can make their own arrangements for the move of their household goods or personal effects. If they choose to make their own arrangements, they assume the responsibility for the planning, preparation, and execution of their moves. Relocating employee is responsible for paying associated costs and may receive a lump-sum payment to cover the related expenses. They may also receive relocation service assistance that may be offered by Human Resources.
Note: Relocation of laboratory, library, scholarly collection, or research equipment is not considered household goods or personal effects, and thus is not considered relocation or moving expenses.
All relocation and moving expense payments are taxable from January 1, 2018 through December 31, 2025 per the Tax Cuts and Jobs Act of 2017. During this time any amount paid to an employee for relocating and moving personal and household goods is subject to applicable federal income tax withholding and Social Security and Medicare taxes, and will be reported on the employee’s year-end tax form (W-2 or 1042-S).
Common relocation expenses are those incurred between the employee's prior home location and his or her new home location. These expenses will be treated as taxable income to the employee. Common relocation expenses include:
- transportation of household goods
- airfare or mileage
- pre-move house hunting
- temporary housing
- short-term storage
Other relocation expenses are less common, but can still be paid as taxable if approved by the hiring department on a case-by-case, exception basis. Approval of the dean or vice president, or their designee is required for these exceptions.
1. Relocation and Moving Expenses – Lump-Sum Payment
A lump-sum payment after a new hire’s start date is the preferred method to pay relocation and moving expenses. Lump sum payments for relocation and moving expenses stated in an offer letter are taxable and should be processed through Payroll Services directly in Workday using the One Time Payment business process and a “Relocation” or “Relocation Gross-Up” payment plan. The signed offer letter or response to the offer email should be attached to the One Time Payment for support.
A lump-sum payment before a new hire’s start date is discouraged but is possible up to 45 days before a new hire’s start date in DEFINE on a VP2 payment document. The new hire must complete a Payee Information Form (PIF), and the hiring department must complete a GGV document to create a vendor record for the new hire in DEFINE. An EFT form (refer to https://purchasing.utexas.edu/ap/vendor-identification-vid-section ) must be completed by the new hire desiring direct deposit of the lump-sum payment. The hiring department creates a VP2 payment document payable to the new hire and codes the transaction with a 1280 object code. The supporting documentation must include a copy of the signed offer letter or response to the email offer and a completed Form I-9. A lump-sum payment must be paid in the same calendar year as the new hire’s start date unless approved in advance by Tax Services and Payroll.
Regardless of when a lump-sum payment for relocation or moving expenses is paid, applicable federal income, Social Security, and Medicare taxes must be withheld. The applicable fringe benefit rate will also be charged to the departmental account.
2. Actual Relocation and Moving Expenses, as Documented
If the department wants to reimburse for actual expenses rather than an estimated amount, then departments may request documentation and/or receipts and may make multiple lump-sum payments as expenses are incurred. Receipts do not need to be submitted to Payroll Services.
These payments are still taxable and should be processed through Payroll Services directly in Workday using the One Time Payment for “Relocation” or “Relocation Gross-Up.” The offer letter or offer email should be added to the One Time Payment as an attachment for support. The payment is subject to applicable to federal income tax withholding (at the supplemental rate) and Social Security and Medicare taxes. The applicable fringe benefit rate will also be charged to the departmental account.
3. Direct Payments for Relocation and Moving Services
Paying a vendor directly is discouraged, but may be necessary in some circumstances. These payments are still taxable to the employee and will be flagged by Payment Services-Travel for taxing by Payroll Services.
Department must process the invoice on a *DEFINE VP2 payment document payable to the vendor using 1280 object code. Note: Relocation and moving expenses for employees must never be coded as nonemployee travel (1260), shipping (1314) or prospective employee travel (1270).
The VP2 document submitted to Payment Services-Travel must include supporting documentation that is prepared according to Imaging Documentation Services guidelines. The supporting documentation must include, but is not limited to, the following:
- Copy of the signed and dated offer letter or offer email. Note: If the employee agreed by email instead of signing the offer letter, then a copy of this email must be included along with a copy of the actual offer letter.
- Itemized invoice plus any other documentation the vendor provides.
- List of expenses as a summary is optional and is not required but it does assist in the processing time of the VP2 document.
If the employee’s (and family member’s) airfare for a house-hunting trip or final move is going to be centrally billed, do not create a Request for Travel Authorization (RTA) document to request travel authorization. Instead, complete a Non-Employee Travel Authorization form (mark LTS for taxable travel) and submit to Travel Agency when making the travel arrangement.
NOTE: Sample Offer Letters for faculty are available on the Executive Vice President and Provost website.