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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13110
Experience:  15years with H & R Block. Divisional leader, Instructor
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My employer requires me to sign a limited power of attorney

Customer Question

My employer requires me to sign a limited power of attorney that allows their tax preparer to prepare my federal taxes. This will enable them to receive any tax refund. They plan to take the monies from my foreign tax credit and pass along the remainder. If the refund is short, they will then extract the shortage from my pay. I claim the foreign tax credit is mine and the company has no legal claim to that money. So in effect, if I do not give them my credit, they will fire me. Sounds like extortion. I see no legal claim to that credit otherwise the IRS would simply give it straight to them. Not to mention half of my tax refund (or owed) belongs to my wife. Never heard of this approach to tax equalization. Usually it involves a hypo tax deduction. I do not feel their approach is legal.
Submitted: 4 months ago.
Category: Tax
Expert:  Robin D. replied 4 months ago.


Half of your refund would only belong to your spouse if they also worked and were due a refund based on their own withholding.

The fundamental principle behind tax equalisation is that a worker abroad should be no better off or no worse off as a result of being assigned abroad.

To guarantee employee is ‘tax neutral’ on taxes, the employer bears any increase in tax costs , as well, any windfall from reduction in worldwide taxes of the employee is credited to the company. This is where the tax credit comes in.

The foreign tax credit is meant to protect form double taxation.

It is a standard practice for many now.

Customer: replied 4 months ago.
I understand tax equalization but I have only seen it carried out using a hypo tax deduction. The company has never had a hypo tax for US commuters. They suddenly decided they will require us to give them the tax credit benefit. It is the method they plan to obtain this money that does not seem legal. Requiring that we hand over our tax information and basically give them direct access to our joint return seems unorthodox.
Expert:  Robin D. replied 4 months ago.

I personally do not like the use of those either. If it were me I woudl rather do my own tax reporting in both countries.

They are fronting the tax so they would be entitled to the tax returned by use of credits.

It is not illegal.

The foreign tax credit goes hand in hand withthe tax reporting it is not separate. The same would be true if the foreign tax exclusion were used instead of the credit.

Customer: replied 4 months ago.
The company is paying the foreign tax and that amount is added to my income and reported as income on my W2. In effect, they are bumping up my salary and I am paying the tax. It has been that way since I first took the job 12 years ago. Now in an effort to basically cut my salary, they are implementing this new policy. Again, it is not as much of what they are trying to do but more of the methods they plan to use. It would be much like being required to give them access to my bank account ang giving them permission to do anything they want. Giving them full access to our joint tax return seems unacceptable under the threat of being fired. This is probably less a tax issue and more of a labor issue.
Expert:  Robin D. replied 4 months ago.

You may want to take this to a legal labor issue but for tax purposes, they are not doing anything illegal.

Perhaps your right to not have to be required to use the policy in place could be covered under some labor law.

I cannot give an opinion about labor issues outside of tax.

Thank you for allowing me to address the tax situation.

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