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Tax law Employer provide rent for out-state employee, and…

tax law Employer provide rent...
tax law Employer provide rent for out-state employee, and the employee should be able to exclude the value of the lodging from gross income. If we have the contract to stated that the employee must be on site for the job therefore, employer paid the rent. Is it adequately qualified to meet that condition? Exclusion gross income and employer deductible? Thanks
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Answered in 6 minutes by:
9/11/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,119
Experience: Taxes, Immigration, Labor Relations
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When an employer provides dwelling - there are certain conditions for exclusion from taxable wages.

If these conditions are not satisfied - dwelling provided by an employer are considered fringe benefits - and the value is added to taxable compensation.

See for reference IRS publication 15B

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

page 15

You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the fol-lowing tests.
--It is furnished on your business premises.
--It is furnished for your convenience.
--The employee must accept it as a condition of employment.

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Customer reply replied 10 months ago
Thanks for answering. I know the three point. I like to get more specific information. Our situation as follow:1. the employee lives in another state.
2. we hired him to work for us. but our business is the state not the employee lives
3. We have agreement with him and stated that we will provide lodging for him.
Above conditions meet the requirements for excluding as employee's gross income?
Customer reply replied 10 months ago
The rental house is located to close business site so that is convenience for employer.

All information you provided is not relevant for THAT exclusion.

"located to close business site" is not specifically means that is located on your business premises...

The IRS provides an example - if you're a household employer, then lodging furnished in your home to a household employee would be considered lodging furnished on your business premises.

Other situations includes lodging provided for farm workers, property manager for rental building who is required to live in the same building as other tenants, etc..

at is convenience for employer.

So far - based on information you provided - I do not see that test is satisfied...

Another issue is "the convenience for employer" test.

Again all the facts and circumstances should be considered with that determination.

For instance - if specific work duties require frequent emergency calls - and rentals are NOT available close to the work site - for instance for remote areas where there is no available rentals.

In your situations - your employer may rent on his own close to the work site - you just choose to compensate that expense.

So far - I do not think the IRS would agree if you choose to exclude that reimbursement.

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Another option you might want to consider - if dwelling may be classified as travel expenses? and may be deductible as such.
That would be true if that is a temporary work assignment.

In this case - your employer would travel for business purposes to a different location - and is eligible for reimbursements not only for dwelling, but in additional for meals, transportation and other travel expenses.

The assignment is a TEMPORARY work location - means it is expected and actually last less than a year.

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Customer reply replied 10 months ago
Thanks for responding. Last question: We hired an employee and whose domicile is anther state. It is not a temporary work location. If we treat it as travel reimbursement , attached invoice as lodging is it ok for that. Many thanks
Customer reply replied 10 months ago
Thanks for responding. Last question: We hired an employee and whose domicile is anther state. It is not a temporary work location. If we treat it as travel reimbursement , attached rental invoice as the lodging expense is it ok for that. Many thanks

If that is NOT a temporary work location - the tax home is changed - and none of travel expenses are deductible.

You still may choose to reimburse for instance dwelling as a fringe benefit - but you woudl be required to treat that reimbursement as wages.

That is regardless if you pay directly to the landlord or pay to the employee, and regardless if you pay with a regular paycheck or separately.

In this case - you may ONLY provide one time relocation reimbursement that is not included into wages.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,119
Experience: Taxes, Immigration, Labor Relations
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Customer reply replied 10 months ago
Thanks. Yes. As you advised. We pay one time relocation reimbursement that is not included into wages. The next year, it might be included as fringe benefit. Great Advise.

Please be aware that not all relocation reimbursements are excluded from wages - but only those paid under an accountable reimbursement plan and which are qualified moving expenses.

For specific details - see following publication

https://www.irs.gov/pub/irs-pdf/p521.pdf

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