Tax Question regarding housing benefit for internship

[TaxQDad]

<p>My D did an internship out of state last summer. She was paid and the company put her up in a long-term-stay hotel very near the office. We expected the value of the housing to be included in her income as a taxable benefit. But she just got her W2 and there's nothing on it about the housing value (it's not included in the box 1 account, or listed anywhere else). I can't figure out why it wouldn't be considered taxable based on my reading of the rules on lodging furnished by employers, unless the temporary nature of the assignment is relevant. </p>

<p>What is my D's responsibility here? Can she just assume the company's accountants got it right and use the numbers on her W2? Should she call them and ask?</p>

[entomom]

<p><a href=“http://www.irs.gov/pub/irs-pdf/p525.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p525.pdf&lt;/a&gt;&lt;/p&gt;

<p>

You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met.</p>

<ol>
<li><p>The meals are:
a. Furnished on the business premises of your employer, and
b. Furnished for the convenience of your employer.</p></li>
<li><p>The lodging is:
a. Furnished on the business premises of your employer,
b. Furnished for the convenience of your employer, and
c. A condition of your employment. (You must accept it in order to be able to properly perform your duties.)

</p></li>
</ol>

<p>Looks like it’s taxable since 2a is not met. My understanding is that you are responsible to report all taxable income/benefits, whether you receive a W2/other paperwork or not. But I’m not an accountant, hopefully others will comment.</p>

[CTScoutmom]

<p>Those rules don’t apply to a temporary work assignment - an assignment expected to last less than one year. Expenses associated with a temporary assignment are deductible on your taxes, or can be reimbursed by the employer (or paid up front by the employer as is the case here).</p>

[TaxQDad]

<p>Entomom, that is what I had read and didn’t understand why it wasn’t included. </p>

<p>CTScoutMom I was wondering if there was something like that at play. Do you happen to know which IRS publication covers that rule so I can read it and reassure myself and my D that she’s all set?</p>

<p>I would have be surprised if the company had gotten it wrong – they do this every year and one would hope that they’d understand the ins and outs of it all. But you never know…</p>

[TaxQDad]

<p>Hmm, I’m looking at publication 463 now which describes the rules for traveling away from your “tax home” for a temporary assignment. But if my D made more more money at the temporary job than she did either at school or at home, would that make the place she lived for her summer her tax home? Or does she qualify as having “no main place of business or work” and then can count our family home as her tax home since that is where she returns to when the dorms are closed and she’s not on temporary summer work assignment?</p>

<p>Looks like we may need to consult an accountant to check on this one!</p>

[allyphoe]

<p>There’s some good analysis (not specific to NRAs) here: [Nonresident</a> Alien Students And the Tax Home Concept](<a href=“http://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Alien-Students-And-the-Tax-Home-Concept]Nonresident”>Nonresident Alien Students and the Tax Home Concept | Internal Revenue Service)</p>

<p>IRS’ position is that if she wasn’t employed elsewhere (had no job while at school, or while at her personal residence), her tax home is where her employment was - so she wouldn’t be considered to be travelling “away from home,” so the temporary work assignment rules don’t apply.</p>

[allyphoe]

<p>“No main place of business” with no job at her residence makes her itinerant, which means you get no deduction / exclusion for any travel. It’s the worst of all answers.</p>

<p>Master Tax Guide says

When there are multiple areas of business activity or places of regular employment, the principal place of business is treated as the tax home. In determining the principal place of business, the following factors are considered:</p>

<p>(1) the time spent on business activity in each area;</p>

<p>(2) the amount of business activity in each area; and</p>

<p>(3) the amount of the resulting financial return in each area.

</p>

<p>I’d guess you’re in a gray area. Have you asked your D if she filled out any paperwork with the internship firm that would lead them to believe she had a tax home to be away from?</p>

[TaxQDad]

<p>She did work at school but earned much more at the summer job.</p>

<p>People without a regular place of work can still have a tax home if they have one place they regularly live and maintain a residence that they keep going back to between assignments. Seems like that is the designation we want for her if it fits.</p>

[4kidsdad]

<p>See [Publication</a> 15-A (2012), Employer’s Supplemental Tax Guide](<a href=“http://www.irs.gov/publications/p15a/ar02.html]Publication”>http://www.irs.gov/publications/p15a/ar02.html)

If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee’s wages. Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less

</p>

[mom2collegekids]

<p>My kids have done summer REUs in the past which come with a paid stipend and housing. We never received any W2 in regards to the housing, nor did we pay any taxes on the housing benefit. We never thought about it, frankly.</p>

[allyphoe]

<p>

People without a regular place of work can still have a tax home if they have one place they regularly live and maintain a residence that they keep going back to between assignments.

</p>

<p>They can have one, but they don’t necessarily have one.

These and many other court cases seem to confirm the principle that the tax concept of a “tax home” is inextricably bound up with the idea of the taxpayer’s employment or engaging in a trade or business, or engaging in an activity for which deductions are allowed under I.R.C. § 162. The absence of such employment or trade or business or activity means that the taxpayer’s tax home is not necessarily located where he resides. In the absence of such employment or trade or business or activity, the taxpayer may have no tax home at all.
The activity of being a student does not constitute a trade or business under the Internal Revenue Code, and thus, in and of itself, cannot establish a tax home.

</p>

[mom2collegekids]

<p>So, does that mean if the student is working in the summer (not going to school), then any funding he’s getting to pay from his employer for housing away from his home location is not taxable. Similar to a company paying for hotels on business trips…you’re not taxed on that.</p>

[CTScoutmom]

<p>The only NRAs who have no tax home are those who intend to be in the US for less than a full year, is not employed, and is not in the US for more than 183 days during the year (and thus meets the substantial presence test).</p>

<p>For a US resident of citizen, this is temporary employment away from the tax home. Because being a student doesn’t constitute a trade or business, the tax home is their home of record - in many cases, where their parents/family lives. If this were not the case, the IRS would not indicate that travel to/from that residence qualifies as a “educational expense” eligible for reimbursement from a Qualified Tuition Plan (529 plans).</p>

<p>Mom2collegekids - yes, a housing allowance for a summer internship would not be taxable - but only to the extent it is used for such housing or other allowable expenses.</p>

[TaxQDad]

<p>Thanks for clarifying this CTScoutmom. It would be helpful if the IRS included an example of a student in pub 463! </p>

<p>If I’m reading this properly then, since he was working an assignment away from his tax home, he could even take a deduction for the cost of meals?</p>

[Arutha]

<p>Thank you for this discussion. S is in the same situation. I was wondering if the tax software that he plans to use to file online from IRS site will address this scenario. Does anyone know?</p>

[MomCat2]

<p>CTScoutmom -
Wait - are you saying that expenses for the student to travel between college and the parents’ home DO qualify as a qualified educ expense eligible for reimbursement from a 529? I thought that travel expenses did NOT qualify - only tuition, required fees, required course materials/books/supplies, and room & board (and, in 2009 and 2010 ONLY, computer expenses). Perhaps I should have been taking more $$ out of our 529…</p>