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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2930
Experience:  IRS licensed Enrolled Agent and tax instructor
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I am a traveling microbiologist in the state of calif. I

Customer Question

I am a traveling microbiologist in the state of calif. I recently received this letter from my agency. I do not own a home. I used my moms address for this letter. However, do I need to show some sort of evidence of payment to my mother for rent? this is what the letter said-
The IRS requires that you pay taxes on travel expense reimbursement and housing benefits unless you are maintaining a residence while on assignment with us. This form will provide us with the information about your tax home.If you do not return this completed form to us or if you do not meet the “tax home” criteria, the IRS requires that we treat travel and housing benefits as income, and we will have to withhold taxes accordingly.You should consult your tax advisor regarding your permanent tax residence and tax liability of travel and housing benefits.The IRS criteria used to determine whether you are maintaining a permanent tax residence is outlined below:
1. There must be a realistic expectation that you will return to and live at your home, and your tax home must be separate and distinct from your temporary address; and
2. You are paying to maintain your permanent tax residence while you are on assignment (i.e. rent, mortgage, room and board); and
3. Generally, you must meet at least one of the following criteria:
a: You lived at your permanent tax residence immediately prior to your current employment, or
b: You have either a family member utilizing the residence, or you utilize this residence frequently for purpose of your
own lodging.The permanent tax residence must be your habitable living quarters and should be at least 50 miles away from your temporary residence. Payments to maintain your personal tax residence must be real and substantial.The IRS considers employment away from home in a single location that exceeds or may exceed one year, to be indefinite, not temporary. Under these conditions, housing and travel benefits would be subject to withholding.
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: My mothers house is in the state of calif as well. If I do need to show some evidence of payment then how much? Will my mothers taxes be effected by this?
Submitted: 7 months ago.
Category: Tax
Expert:  emc011075 replied 7 months ago.

Hi. My name is ***** ***** I will be happy to help you.

To be able to deduct travel expenses you need to have a tax home. Tax home is place where you usually return after work or short assignment. If you cannot establish a tax home, you cannot deduct your travel expenses.

Per the IRS:

Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.

If you have more than one regular place of business, your tax home is your main place of business.

Factors used to determine tax home. If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is.

  1. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

  2. You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

  3. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses.

Expert:  emc011075 replied 7 months ago.

Basically, what the company wants from you to show that you have established and maintain a tax home. Do you help your mother with housing expenses for instance?

Customer: replied 7 months ago.
no I don't
Expert:  emc011075 replied 7 months ago.

Everybody has living expenses. You can deduct your livings only if you have double them because of your job. For instance you maintain your main home in CA where you regularly return, but because of nature of your work you often need to stay in hotels. Because you are paying twice, for your home and the hotels, you can deduct the living expenses while traveling. But if your mom let you stay with her rent free, than you cannot claim her place as your main home and your tax home is where you work. Which means you should not be deducting travel expenses.

Customer: replied 7 months ago.
Should I being paying her some sort of rent and if so how much?
Expert:  emc011075 replied 7 months ago.

To reimburse you, your company needs to have establish your tax home.

To pay her or not to pay her is up to you. And how much it depends on your location. You should not be paying her less than fair market value. Research rental properties in the area to determine what would be fair market value, how much a stranger would pay for renting a space/room at your mom's house.

Customer: replied 7 months ago.
will the IRS ever look into this type of situation where I claim my mothers home as my tax home? What type of documentation needs to be set in case the IRS does ever look into this? How does this effect my mothers tax situation?
Customer: replied 7 months ago.
What if I only paid her 5 dollars for a room. That is still payment. That still counts has a paying for a tax home right?
Expert:  emc011075 replied 7 months ago.

The IRS usually do not initiate an audit because of tax home but if you get audited for something else, you may need to proof that your mom's home is your tax home. Paying her $5 a month would be a payment, but hardly a fair market value. If you decide to pay her rent, it has to be reasonable. And she would need to claim it as her income. It may be a better solution to quitclaim part of the house to you and help her with property taxes or utilities, for instance.

Customer: replied 7 months ago.
what do you mean by quitclaim part of the house to me? Does that mean she would have to put the house or part of the house in my name? I assure you that she will not do this. also, the 5 dollars is payment to her. It has to be reasonable to whom....the IRS or my mother. This way 60.00 dollars a year that she claims towards her income from me a year is nothing on significant on her own taxes.
Expert:  emc011075 replied 7 months ago.

To quitclaim part of the house to you would mean to put your name on the title. The rent should be reasonable, meaning what a stranger would pay her for renting a room in her house. It would be more than $5.

Expert:  emc011075 replied 7 months ago.

Any questions? Is there anything else I can help you with today?

The company basically wants you to prove that you actually have living expenses in CA. You may fool the company by making up rent payments but you will not fool the IRS. The IRS would check your bank account if you really make rent payments.

Anyway, I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

Customer: replied 7 months ago.
I understand that I need to make real rent payments. And the rent payment is between me and my mother. So 5 dollars is a legit amount. The IRS can check my bank account and the payments will have been made. So everything in that sense is legal. Right?
Expert:  emc011075 replied 7 months ago.

Well, it is legal, that's not the issue. But I can tell you that an IRS auditor will not accept it as rent payment. His argument will be that it is way bellow the fair market value and not reasonable. On top of it, it will just give him another reason to dig deeper.

Expert:  emc011075 replied 7 months ago.

Any questions?

The IRS use term "frivolous claims". It is usually applied to deductions (claiming trip to Disneyland for the entire family as clients entertainment deduction), but it can also be applied to claims that are highly unlikely and/or only serves one purpose: to claim deduction that could not be claimed otherwise. While the $5 per month rent check all the boxes and qualifies you for the deduction, the IRS auditor and probably your employer may dismiss is as not serious.