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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14055
Experience:  15years with H & R Block. Divisional leader, Instructor
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Tax equalization assignment. Is this appropriate?

Customer Question

Tax equalization for domestic assignment. Is this appropriate?
Submitted: 12 months ago.
Category: Tax
Expert:  TaxGreg replied 12 months ago.

Hello, my name is Greg. Can you be a bit more specific?

Usually tax equalization is used when someone is going to be working out of the country and not for a domestic (inside the country) assignment. It is used to protect the employee from having to be double taxed (both in their country and in the country they are working in) - the company, for instance, might be responsible for the other country fees and taxes.

Customer: replied 12 months ago.
I live in Florida but worked in New York for large amount of time last year on expense account. My company is redoing my W2 claiming tax equalization? I don't feel this is correct.
Expert:  TaxGreg replied 12 months ago.

Ah, this is a bit more real world and not the "homework" category it was placed in. Let me opt out and move you over to our tax experts who would have a better handle on the rules and regulations related to this issue.

Someone should be with you shortly.

Expert:  Robin D. replied 12 months ago.

Hello

Tax equalization is used for those that are living their country to work aboard.

Under a tax equalization policy, the employee is assured that he or she will pay neither more nor less taxes on foreign assignment than what would have been paid had the employee remained in the US.

If you worked in NY you are taxed in NY. If you also worked in another state that wage taxable to NY would depend on why you were outside the state.

Equalization does not fit any need to correct a W2.

What are they changing?

Customer: replied 12 months ago.
I understand the tax rate part but they claim the W2 is being adjusted to add compensation for lodging and other taxable expenses paid on my behalf. This does make sense since I submit an expense report each week for all my expenses incurred including lodging. The equalization is so I'm not responsible for tax on these items.
Expert:  Robin D. replied 12 months ago.

Oh I see.

If they are adding that to your income then you will want to look at using form 2106 and Schedule A to claim a deduction for that.

That is not equalization. If you turned in an expense report generally the amounts are not made taxable to you.

That is making you pay the tax on the expenses you had. BUT because you had these expenses you can use 2106 form and Schedule A to deduct.

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Expert:  Robin D. replied 12 months ago.

Did you want to add more info?