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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Regarding paying an employee a fixed subsistence per week in

Customer Question

Dave B regarding paying an employee a fixed subsistence per week for working in our home state while he lives elsewhere. how do we handle on W2?
JA: Thanks. Can you give me any more details about your issue?
Customer: that's pretty much it. we're a CA construction co. most employees have subsistence of a day or two while on certain jobs, but this one employee gets a fixed subsistence to cover travel and living expense in California.
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Submitted: 9 months ago.
Category: Tax
Expert:  Lev replied 9 months ago.

IF the corporation provides you as an employee of the corporation - reimbursements - that is treated as fringe benefits - A fringe benefit is a form of pay for the performance of services.

Any fringe benefit the employer provides is taxable and must be included in the recipient s pay unless the law specifically excludes it.

For fringe benefits - see supplemental publication 15b

and page 6 - Table 2-1. Special Rules for Various Types of Fringe Benefits

https://www.irs.gov/pub/irs-pdf/p15b.pdf

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However - your employer is ALLOWED (not required!) to exclude from taxable wages reimbursements for business related expenses if such reimbursements are paid under an accountable reimbursement plan.

An accountable reimbursement plan generally means - these expenses are otherwise deductible and you provide a timely report to your employer how the money were used.

Specifically for your situation - deductions are allowed for all travel expenses - if that is a temporary assignment to a different location.

Expert:  Lev replied 9 months ago.

The key in such determination is temporary -

According to the IRS - you must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise.

So - if that is a temporary assignment - you may deduct Per Diem, lodging and other travel expenses.

You may refer to the IRS publication 463 -

http://www.irs.gov/pub/irs-pdf/p463.pdf

page 5 - Table 1-1. Travel Expenses You Can Deduct

Regarding Per Diem rate ...you can use the standard meal allowance method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs.Your allowable lodging expense deduction is your actual cost.

Receipts are required fro lodging. If you are using you car to travel to temporary job locations - you may deduct car expenses - either actual OR based on teh standard mileage rate.All these are DEDUCTIBLE job related expenses.

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So subsistence payments are included into wages and reported on W2.

If paid under an accountable reimbursement plan - may be classified as business related reimbursements and not taxable.

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