Establishing the appropriate accounts, account type and account taxability within the Equus Platform™ system is the next step in processing a gross-up calculation. This is done by selecting Accounts under the Configuration tab which opens the Account Maintenance screen. Here new accounts can be created and existing accounts can be viewed/edited.

This will make the account inactive and not available for selection in an expense.

Select a category for the account if you would like to otherwise this field can be left on “Please Select”.

When establishing accounts to be used in the gross-up process, a selection should always be made in the Type field. This drop down menu comes standard with several options. Only the following four selections should be used for gross-up purposes.

Business Expense – This Type should be assigned to any “business expenses,” which within the system are generally third party service fees and home selling expenses (if part of a qualified home sale program).

Expense – This Type should be assigned to any accounts that have a US Taxability of Deductible, Excludable, or Non-Deductible.

Tax Assistance – The ASSIGNMENTPRO™ application stores tax assistance in the form of accounting entries. One and only one account with a Type of Tax Assistance should be established. The system will automatically use this account.

Withholding – The ASSIGNMENTPRO™ application stores withholding in the form of accounting entries. One and only one account with a Type of Withholding should be established. The system will automatically use this account.

This drop down menu comes standard with several options. Only the following two should be used for gross-up purposes and should only be used when the Expense option has been selected in the Type field.

En Route Meals – One Non-Deductible account should be established to be exclusively used for en route (day of move) meals, and the En Route Meals Sub Type should be assigned to this account. Note that reimbursed en route meals are not taxable in the states of NJ and PA. By assigning this Sub Type to the en route meals account, the tax calculation logic will know to handle this account differently for NJ and PA, as well as any local/SUI authorities in these states.

Split Mile - The IRS only allows for a given amount per mile to be deducted/excluded from income for en route and/or household goods mileage.

In order for ASSIGNMENTPRO™ to automatically calculate and split the taxability of en route and/or household goods mileage, an account must be established with its Type field set to Expense, the Sub Type field set to Split Mile and its US Taxability field set to Excludable. The system will use the appropriate deductible IRS rate and Mileage Reimbursement Rate to calculate the appropriate split. The expense entered will not display as two expense entries. The taxability of the single expense amount will be split based upon the expense date and the rates that apply to that expense date.

The system will not automatically split the taxability, if the Split Mile Sub Type is not assigned. To use a mileage reimbursement rate that differs from that provided by the IRS, two accounts will need to be created: one with the US Taxability field set to Excludable and one with the US Taxability field set to Non-Deductible. A manual calculation will need to be done to determine the split and the two amounts will then need to be entered in the appropriate accounts.

Excludable (Pre-2018) – Prior to the 2018 tax year, moving expenses could be excluded from an Assignment’s income. However, as part of the 2018 Tax Reform, beginning in the 2018 tax year, those expenses could no longer be excluded from income. In response to the change in treatment of these expenses some states decided to conform to the Federal changes and some states decided to not conform to the Federal changes and continue to allow for these expenses in to be excluded from income. The Sub Type setting will allow for the tax calculation in the Equus Platform to treat these expenses appropriately for the non-conforming states.

Therefore, the accounts that should have their Sub Type field set to Excludable (Pre-2018) are the accounts that would have been previously, prior to the 2018 tax year, viewed as excludable. An example of such account would be something like Shipment of Household Goods.

Mileage (Pre-2018) – Much like the Excludable (Pre-2018) Sub Type discussed above. Unlike Federal, the non-conforming states will also still allow for a portion of en route and/or household good mileage expenses to be excluded from income. This Sub Type setting will allow for the tax calculation in the Equus Platform to appropriately split the mileage expenses, for the non-conforming states, based on the current IRS Mileage Reimbursement Rate. Please note that the US Taxability of this account should be set to Non-Deductible to ensure that the mileage is not split for Federal and conforming state.

The accounts associated with the expenses that will be considered when calculating a gross-up must be assigned the appropriate taxability. The US taxability assigned to an account will determine how expenses associated with that account will be treated during a US tax calculation. This drop down menu comes standard with the following options: Deductible, Excludable, Non-Deductible and Not Reportable.

Deductible – This taxability type should be assigned to expenses that are deductible as itemized deductions on IRS Form 1040 Schedule A, such as mortgage interest (points) and taxes. Deductible expenses must be added into the employee’s wages but can normally be deducted from taxable income on their tax return.

Excludable – This taxability type should be assigned to expenses that are deductible moving expenses on IRS Form 3903. These expenses are defined in IRS Publication 521 and include transportation and storage of household goods expenses and travel and lodging expenses in moving from old home to new home.

There is no need to establish separate accounts for expenses paid to vendors and expenses reimbursed to the employee. This information will be captured during the voucher/expense entry process and the system will categorize the expenses appropriately. Excludable expenses that are paid to the employee are referred to as ‘Excludable Reportable’. Excludable expenses that are paid to a vendor are referred to as ‘Excludable Non-Reportable’.

Non-Deductible – This taxability type should be assigned to moving expenses that must be added into wages and cannot be deducted on the tax return. These moving expenses are often referred to as ‘taxable’ moving expenses. Examples include: house hunting expenses, temporary living expenses, allowances, lump sums, home selling expenses (if not part of a qualified home sale program), home purchase expenses, etc.

Not Reportable – This taxability type should be assigned to accounts that have no taxability, such as business expenses or withholding.

The accounts associated with the expenses that will be considered when calculating a gross-up must be assigned the appropriate taxability. The Canada taxability assigned to an account will determine how expenses associated with that account will be treated during a Canada tax calculation. This drop down menu comes standard with the following options: Allowable, Not Reportable and Taxable

Allowable – This taxability type should be assigned to expenses that are allowable or non-taxable expenses.

Not Reportable – This taxability type should be assigned to accounts that have not taxability, such as business expenses or withholding.

Taxable – This taxability type should be assigned to expenses that must be added into wages.

This field will only be visible and required when the Excludable option has been selected in the US Taxability field. This field allows the selection of the Excludable Type for the Account. This drop down menu includes Household Goods and Final Move. The option selected in this drop down menu will drive which section the expense will be mapped to on the Employee Moving Expense Information (4782) section of the Year End Report.

Tax Assistance and Withholding Accounts

In order to successfully compute gross-up for an assignment, a Tax Assistance and a Withholding account must be established. The Tax Assistance account must have the Type field set to Tax Assistance and the US Taxability and Canada Taxability fields set to Not Reportable. The Withholding account must have the Type field set to Withholding and the US Taxability and Canada Taxability field set to Not Reportable.