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My employer is based out in California. I have been assigned…

Customer Question
Hello. My employer is...

Hello. My employer is based out in California. I have been assigned to a project in Minnesota for a 3 year assignment. For this duration, my client is going to pay my rent (or reimburse me upto a certain amount towards my lodging expenses). Am I supposed to pay tax on this amount?

Accountant's Assistant: Have you talked to a tax professional about this?

Yes. He said I am not supposed to pay tax on this as I first get my income. I pay my rent and then I expense it to the client who then reimburses me for that amount.

Accountant's Assistant: Which tax year is this for?

2016-17-18

Accountant's Assistant: Anything else you want the Accountant to know before I connect you?

No... that's all

Submitted: 2 months ago.Category: Tax
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5/30/2018
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Tax Professional: Tax.appeal.168, Tax Accountant replied 2 months ago

As the work assignment will not be a temporary assignment, the lodging expenses reimbursed to you by your employer will be considered taxable income. If the assignment was a year or less, then the reimbursements would not be considered taxable income. SEE BELOW:

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Reimbursements you receive for temporary housing while on temporary assignment are not taxable, but those received for permanent assignments are.

The IRS further defines "temporary" as one year or less. Temporary housing may include a hotel or motel, an apartment or a rented house.

REFERENCE SOURCE:

https://finance.zacks.com/temporary-housing-taxable-10989.html

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You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you can't deduct travel expenses paid in connection with an indefinite work assignment. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if you realistically expect that you'll work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for one year or less, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes.

REFERENCE SOURCE:

https://www.irs.gov/taxtopics/tc511

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Customer reply replied 2 months ago
Thanks for your response. So the assignment was not supposed to last this long. So based on what you are saying, I will be paying tax twice. Because first I get my salary (which is taxed of course). Let's say the amount I get is 1000 dollars. Out of this, I pay my rent which is say 300 dollars. I pay this rent from an income on which tax has already been paid. Now my client pays me 250 dollars back (as this is the limit up to which they will reimburse the rent). So this 250 becomes part of my taxable income and then I pay tax on it once again?Is this understanding correct? Also, if I get reimbursed only for 11 months in 1 financial year and for the 12th month, I pay the rent, and don't submit it as an expense, does it still qualify as "Taxable Income"? (because now, my expenses are for less than an Year)Thanks
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 months ago

If the employer establishes a written accountable plan, and the employees submit properly documented expenses under that plan, then the reimbursements shouldn't count as taxable income.

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If the employer has a written accountable plan and you do not submit an expenses report, those funds will be counted as taxable income.

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