Question #1: If the church creates a form which states that an employee agrees to repay the moving costs if their employment is voluntarily or involuntarily terminated before two years of service are completed, does this constitute an employment contract or cause concerns regarding the At-Will employment laws?
Answer: A moving contract is fine. Just to be on the safe side, I would include a sentence in it to the effect that the moving allowance does not constitute an employment agreement and that the at-will employment laws of the respective states are completely applicable. You might even tell the employee that any repayment would be first taken from their pay and if there is still a balance the former employee would be expected to reimburse the church.
Question #2: If the church gives money to a new employee to cover moving expenses, is that money considered income, non-taxable income, or is there a way to give the money/cover the expenses without it affecting the employee’s income all together?
Answer:
- Publication 521 from the IRS is a doc from the IRS which details everything there is about moving expenses. Download a copy into the church’s “IRS Forms & Publications” folder in your church’s server. Whenever you need to, send that Publication to the employee to whom it applies.
- There are two ways to go about this:
- Give a lump sum to the employee and add that amount to the employees’ W-2 at the end of the year.
- Reimburse the employee for expenses based on receipts/invoices turned in.
- Either way, the employee must keep track of all invoices, bills, expenses, etc. and either turn them for reimbursement or list them on their next 1040 as an itemized deduction. It is a lot of paperwork to keep up with, but it is well worth it so that the employee does not have to pay taxes on the lump sum or pay out of pocket for the expenses incurred.
- On the church’s side, the easiest method is to give the new employee a lump sum payment and have the employee keep track of all his paperwork without turning in anything to the church. That makes things very easy and simple for the church (which is why I recommend it) and makes the employee responsible for his expenses. It also encourages the employee to be frugal; the less he spends on the move, the more he can keep in his bank account!
Lead On!