Tax gross up

[gekkoplus]

Hello,

What is a "Tax gross up"? I recently relocated to west coast for my new job. One of the perk I get from my new employer as a part of relocation benefits is the tax gross up.

I searched over internet and found that it is the amount that the employer pays to an employee to compensate taxes on relocation income which an employee has to pay to the IRS. Now that I am filing my tax returns for 2007, I realized that I did not receive any such gross-up payment from my new employer and was wondering whether I should go and talk to HR about this. But before that I wanted to make sure I understand what the term actually means.

[sweeps]

Typically a gross up is when your employer gives you a benefit that is taxable, but rather than stick you with the extra taxes on that benefit, your employer increases your taxable income enough to compensate for the taxes you'll have to pay on that benefit. The idea is that you won't owe any more taxes than if you hadn't received the benefit.

Gross up's aren't perfect though. You may not be made perfectly whole by a gross up depending on your tax situation.