1. Home
  2. Taxes General Forum
  3. Taxation of Reimburseable Local Travel Expenses to an "Indefinite Alternate Work Site"

Taxation of Reimburseable Local Travel Expenses to an "Indefinite Alternate Work Site"

As part of my company's business, I and my staff travel locally to our main customer headquarters for meetings and technical support, and we submit and are reimbursed for travel expenses (miles in a personal car, parking fees), where if we start or end travel to the alternate site from home, we subtract normal commuting miles to our own office. The customer facility is approximately 30 miles from our facility.

My employer travel office notified me that one of my staff just exceeded 35 such trips this year combined with travel to the customer's site last year, and therefore the customer's facility is an indefinite alternate work site, and all previous reimbursements this year and any future trip reimbursements are now taxable income for this year for the staff member, and the taxable income from the prior trips will be added to his next pay stub, with additional taxes withheld.

The employer interprets that if any part of the trip to the customer's facility started or ended from the staff member's house and the staff member is reimbursed, this is now taxable. I interpret the tax law differently and would like some clarification. I interpret the trips count toward the 35 annual trip minimum to designate the alternate work site as an alternate work site if and only if the main work site is not visited that day, that is, the staff member spends a full day at the customer's site, starting from home, to the customer's site, then returning home. My employer interprets that only one leg at home to/from the alternate site is required, that is, if the staff member starts from home, goes to the customer's site for 2 hours, then comes back to our office for the rest of the day before going home, or alternatively starts from home, comes to our office for 6 hours, then goes to the customer's site for the rest of the day, then goes home from there, that these also count toward the 35 trip minimum resulting in taxable reimbursements. I disagree as mentioned.

In addition, we are not conducting "office work" at the alternate site, per se. We have no desk, no phone, no computer at the alternate site. We primarly attend meetings and provide technical expertise and guidance. Therefore, I also question why any such trips even beyond a one-year period are considered working away from the tax home.

Before I register my disagreement, I would like some insight as to which interpretation is correct for the alternate work site (only if there a full day as I claim or a partial day as the employer claims). Also, is visiting a client or customer considered working at a temporary alternate work site?

I'm looking at Pub 463, section 4.

I myself have not been subject to this issue since I always travel from our office to the alternate site and back to the office, which apparently never triggers the alternate site an indefinite alternate work site.

Reply to
Dimitrios Paskoudniakis
Loading thread data ...

For starters, where does the "35 Trips" come from? I've been in this business for almost 30 years and I've never heard reference to the number of trips being the issue. Tell me where the 35 trips came from and I'll see if I can help.

In general, temporary living expenses are allowable as either a deduction OR a nontaxable reimbursement IF three conditions are met:

1 - the employer has a written accountable reimbursement plan in place and you're reimbursed pursuant to that plan; 2 - the temporary location is temporary - meaning that it is expected to last LESS than ONE year when it starts AND IN FACT DOES last LESS than one year. It is possible that it could start out as temporary (I think you'll be there about 10 months) and then converts to NOT temporary (oops, we really need you to stay there for 3 more months). So you can get money that "feels" like a tax free reimbursement to start then converts; 3 - this only works if the expenses being reimbursed would have been deductible in nature by the employee. It doesn't mean that the employee would get a benefit from it, just that he COULD qualify as deductible under the law.

As D. Stussy pointed out, your employer is free to modify the company plan as they please. IF that's what's happened in this case I don't see that you or your colleague has much choice, the employer can do pretty much as he pleases.

On the other hand, if the reimbursement comes to him as taxable income he should be able to deduct his costs as a Miscellaneous Itemized Deduction on Schedule A. BUT this can easily trigger the AMT.

Good luck and please let us know how this turns out.

Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

reimbursements

interprets

Your employer is free to do what he wants, and if he wants to change your "accountable reimbursement plan" to a non-accountable plan (thus making you take deductions on form 2106), that's his choice.

Reply to
D. Stussy

Who are the checks made out to?

I did not find "35" in chapter 4 of publication 463 at

formatting link

Where is this rule stated? You can deduct reimbursements if the plan is non-accountable. If the plan is accountable, then the amounts are not added to your W-2 line 1 and thus you ignore it.

BEGIN QUOTE

formatting link
Reporting your expenses under a nonaccountable plan. Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Also, your total expenses will be subject to the 2%-of-adjusted- gross-income limit that applies to most miscellaneous itemized deductions.

END QUOTE

Publication 463 says

BEGIN QUOTE

formatting link
Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.

END QUOTE

Note the word "Generally", which means it is not a fixed rule. I think in your example, if 3 more months are needed, then it might still be considered temporary. Also, if the same employee of the consulting firm travels to two different client company sites for more than one year, then I still think it is a temporary job.

I think it depends who the reimbursement check is made out to. If it is made out to the consulting firm, then the consulting form will report it as income on its form 1120 or Schedule C, then can reimburse his employee under an accountable plan, the amount is a deduction for the consulting firm, and no effect on the employee.

Reply to
removeps-groups

The reimbursement check is made out to the employee from the employer, after the employee submits a request for reimbursement for local transportation expenses and this is approved by the employee's supervisor. This is a separate check and is not added to the regular paycheck. The employer will continue to reimburse this employee, but will also now start to withhold federal and state/local income tax, and payroll taxes on this reimbursement - money out of his pocket when his employer and client/customer are asking him to go to the customer's office for meetings. They are also going to take out of his next paycheck income and payroll taxes retroactively back to January 1 for all trips this year, to date.

Since my employer reimburses employees for submitted reimbursements for local (and long-distance) travel for the firm, I assume they have an accountable plan.

I have sent my employer's travel accounting office a list of questions, and I have not yet received a reply.

  1. Where does the 35 trips come from? It is not in Pub 463.

  1. Is going to a client/customer's site for a one-day or less meeting at the employer/customer request, where the employee has no desk/phone/computer, considered working at an alternate work site?

  2. If the answer to 2 is Yes, then isn't the reimbursement taxable if and only if the trip is round trip from home to the alternate work site, with no partial hours worked at the main office that day? Why is the employer counting toward the 35 trip limit partial trips where part of the day is worked at the main office and the employee attends a part-day meeting at the customer's office?
Reply to
Dimitrios Paskoudniakis

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.