Maybe turn down that business trip nex time...

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Maybe turn down that business trip nex time...

Postby Jfet » Sun Mar 31, 2013 8:07 pm

Company paid for a business trip and billed some of the expenses on spouse's W2 as wage income

I did not know before that these expenses have to exceed 2% of your gross income before they are deductable.

So with a little over $4500 of extra W2 income we get to pay $1500 in tax and get no deduction...all for work done for said company.

Gotta love these tax laws.

next time they ask her to go on a business trip...going to suggest she pleads being scared to fly or something.
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Re: Maybe turn down that business trip nex time...

Postby dm200 » Sun Mar 31, 2013 8:26 pm

I don't know the details, but it seems to be the situation that your spouse's travel expenses are not considered a justifiable business expense of the company, and therefore considered compensation. Are you sure that the spouse's expenses would even be deductible if they exceeded the 2% threshold.

I might also clarify with the company why, if they asked her to go, these were not considered non-income expenses. Perhaps the issue is more with your company than with the tax laws.
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Re: Maybe turn down that business trip nex time...

Postby Jfet » Sun Mar 31, 2013 8:34 pm

She went to work for the company in a different branch in a far away location for a couple of months.

We kept our home because it was only a couple of months. The distance test passes the moving expense portion but the time test fails ( <39 weeks).

They paid for her flight, a meal stipend, and an apartment at the new business location. It looks like they reported as wages on her W2: the flight, meal stipend, and some outrageous $1600 fee they paid to a tax accountant to prepare a one page document that helped not at all.

I suppose for a lot of people this would not be an issue as they [inappropriate comment suggesting tax evasion removed by admin LadyGeek]...we have a paid off house and barely have more itemized than standard deduction.
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Re: Maybe turn down that business trip nex time...

Postby rickmerrill » Sun Mar 31, 2013 8:59 pm

She is doing company work in another location and said company considers the additional expenses compensation? Bad company. Tax laws are not to blame.
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Re: Maybe turn down that business trip nex time...

Postby LadyGeek » Sun Mar 31, 2013 10:42 pm

As a reminder, discussions of bypassing the law are totally unacceptable here.
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Re: Maybe turn down that business trip nex time...

Postby Rob5TCP » Sun Mar 31, 2013 10:52 pm

I setup the software for one of my clients. They have 5-6 staff sales reps and independents. The sales reps receive W2 for their salary and commission. For all expense reimbursements,
they receive an AP check (non-1099). For any personal expenses there is no reimbursement. Their reimbursement never is picked up as income to them.

For independent agents with a 1099 a similar procedure is in place. Once a month all consulting fees are paid. On a different day, a separate
NON 1099 reimbursement check is issued.

Not sure why here expense reimbursements (or outlays) would be picked up as income to her and appear on a W2.
As stated, this isn't the tax laws, this is poor policy
(unless I am missing something).
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Re: Maybe turn down that business trip nex time...

Postby Jfet » Sun Mar 31, 2013 11:10 pm

Poor policy then I guess. Oh well, not much we can do really except refuse to go on future trips.
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Re: Maybe turn down that business trip nex time...

Postby Saving$ » Sun Mar 31, 2013 11:34 pm

Unless you have some sort of documentation that explicitly states the company intended to count these reimbursements as income, I would politely ask the company about this. I had this happen to me once; as soon as I inquired, they looked into it, and the reimbursement was revised to exactly what it was - a reimbursement of company expenses and not income.

Even if for some reason they decide it was reported properly, your spouse should request enough income to be made whole; the assignment was for the benefit of the company, so it should not cost you money.

I'm not familiar with your situation, but I have also worked out of town for a company. Depending upon how far away the remote location is, the company flies you back every weekend, every other weekend, monthly, or if overseas, sometimes just every 60 days. This is standard procedure, and all the expenses are reimbursable, including the temporary lodging at the temporary location. These trips back usually include at least 1/2 business day at the home office in meetings catching the home division up on the status of the offsite project. That may have something to do with how long each stint at the out of town place is.
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Re: Maybe turn down that business trip nex time...

Postby Calm Man » Mon Apr 01, 2013 11:18 am

I think it was probably an error. Alternatively it may be that some costs are considered over and above what is considered reimbursable for an expense report. Just ask. I can tell you that in the first year I consulted I received a 1099 that included a bout 20K of expense reports. I inquired and the nice young lady said that they did it that way as it was easier to just add up the totals paid to somebody and that the accountant would take care of it. I pointed out that I am my own accountant plus an audit risk goes up a lot if one adds such a large amount of deductions to offset income on a Schedule C. I requested they look into this and do an amended 1099. She spoke to her more experienced supervisor (this young lady was maybe 25 and the supervisor was an ancient 30 or so). After he inquired he learned that what I was saying was standard in the business world.
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Re: Maybe turn down that business trip nex time...

Postby sesq » Mon Apr 01, 2013 12:01 pm

Was this money to house and feed you while your wife worked in the remote location?

The classic issue that comes up on this kind of issue is the CEO is off to Hawaii for board meetings (or more likely, Bermuda) and the spouse and kids ride the corp jet and come along and stay in the lush suite. The IRS views that as spouse and kids got a vacation and the value of that is income to the CEO.

The other end of the spectrum, is a facility lost a manager at an office elsewhere and needs their star employee to travel out there and run the place until a replacement is found (or whatever the business reason). The star is out there for the needs of the biz and is housed there for the convenience of the employer. The star may pay the items personally and be reimbursed. That shouldn't hit the w-2 or the 1099, since they are not compensation to the employee, they are expenses of the biz being reimbursed by the company.

Which of these scenarios are you closer to? If it is the latter I would be requesting an amended w-2 to correct their error.
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Re: Maybe turn down that business trip nex time...

Postby leonard » Wed Apr 03, 2013 6:02 pm

Expense reimbursements are not wages. Simply get the company to correct the W2. It does not make sense to pay taxes for someone else's accounting error.

If the company refuses - simply have your tax accountant (or you) adjust the numbers to the appropriate numbers and keep a worksheet (and the receipts) to back up the numbers in case you are audited. Again, your not legally bound to pay more taxes because someone made an accounting error. It's not clear why you are assuming have to.
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Re: Maybe turn down that business trip nex time...

Postby dm200 » Thu Apr 04, 2013 9:43 am

leonard wrote:Expense reimbursements are not wages. Simply get the company to correct the W2. It does not make sense to pay taxes for someone else's accounting error.

If the company refuses - simply have your tax accountant (or you) adjust the numbers to the appropriate numbers and keep a worksheet (and the receipts) to back up the numbers in case you are audited. Again, your not legally bound to pay more taxes because someone made an accounting error. It's not clear why you are assuming have to.


I don't agree. Some expense reimbursements must, by IRS regulations, must be reportable as income. For example, I know of one type of organization, where it is very common for the organization to pay for spouse's travel expenses to conferences. However, such travel is (and must be) reportable as taxable income.
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Re: Maybe turn down that business trip nex time...

Postby jjbiv » Thu Apr 04, 2013 6:27 pm

dm200 wrote:
leonard wrote:Expense reimbursements are not wages. Simply get the company to correct the W2. It does not make sense to pay taxes for someone else's accounting error.

If the company refuses - simply have your tax accountant (or you) adjust the numbers to the appropriate numbers and keep a worksheet (and the receipts) to back up the numbers in case you are audited. Again, your not legally bound to pay more taxes because someone made an accounting error. It's not clear why you are assuming have to.


I don't agree. Some expense reimbursements must, by IRS regulations, must be reportable as income. For example, I know of one type of organization, where it is very common for the organization to pay for spouse's travel expenses to conferences. However, such travel is (and must be) reportable as taxable income.


In this example, if the spouse's attendance at the conference is mandatory (i.e. it serves a business purpose), the employer should be grossing up the reimbursement amount paid to the employee for the tax the employee will have to pay on the reimbursement. If the spouse is coming along to take a fun trip, that is another matter entirely, and calls into question why the employer is paying for the spouse's travel.
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Re: Maybe turn down that business trip nex time...

Postby tfb » Thu Apr 04, 2013 10:21 pm

jjbiv wrote:In this example, if the spouse's attendance at the conference is mandatory (i.e. it serves a business purpose), the employer should be grossing up the reimbursement amount paid to the employee for the tax the employee will have to pay on the reimbursement. If the spouse is coming along to take a fun trip, that is another matter entirely, and calls into question why the employer is paying for the spouse's travel.

My employer did this for me one year. For doing a good job, select employees and one spouse/guest for each are treated to a trip to a destination for a few days. Guest's attendance is of course not mandatory. The employee's and the guest's expenses are paid but the guest's expenses are added to W-2 as income. Paying the tax was worth it.
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Re: Maybe turn down that business trip nex time...

Postby Bacchus01 » Fri Apr 05, 2013 12:09 pm

Jfet wrote:She went to work for the company in a different branch in a far away location for a couple of months.

We kept our home because it was only a couple of months. The distance test passes the moving expense portion but the time test fails ( <39 weeks).

They paid for her flight, a meal stipend, and an apartment at the new business location. It looks like they reported as wages on her W2: the flight, meal stipend, and some outrageous $1600 fee they paid to a tax accountant to prepare a one page document that helped not at all.

I suppose for a lot of people this would not be an issue as they [inappropriate comment suggesting tax evasion removed by admin LadyGeek]...we have a paid off house and barely have more itemized than standard deduction.



You probably are not understanding this situation correctly. It should have been in her paperwork. More than likely what has happend is that they reported it as income (because they have to) but also grossed it up and paid the taxes on it. This is verys similar to relocation-type assignments. They have to submit taxable income, but then they reimburse you the taxes in the same statement.

Check with HR. I'll be that's what they did. I had over $200K added to my wages one year because of a relocation. But that include the tax gross-up. Net tax impact to me was zero (it was actually positive, but that's a long story).
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Re: Maybe turn down that business trip nex time...

Postby leonard » Fri Apr 05, 2013 6:19 pm

dm200 wrote:
leonard wrote:Expense reimbursements are not wages. Simply get the company to correct the W2. It does not make sense to pay taxes for someone else's accounting error.

If the company refuses - simply have your tax accountant (or you) adjust the numbers to the appropriate numbers and keep a worksheet (and the receipts) to back up the numbers in case you are audited. Again, your not legally bound to pay more taxes because someone made an accounting error. It's not clear why you are assuming have to.


I don't agree. Some expense reimbursements must, by IRS regulations, must be reportable as income. For example, I know of one type of organization, where it is very common for the organization to pay for spouse's travel expenses to conferences. However, such travel is (and must be) reportable as taxable income.


This still isn't that confusing. If the spouse isn't on the trip "for business", then of course it's not a business expense. But, also, if I use the corporate expense process for any person expense - including spouses personal travel expense - I don't expect the company to reimburse that.
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Re: Maybe turn down that business trip nex time...

Postby tractorguy » Sat Apr 06, 2013 11:41 pm

Is it possible that the $1600 "tax accountant fee" is really the additional $1500 you think you owe in taxes? Was this $1600 sent to the federal and state government as additional withholding? I have a strong suspicion that your spouse's company took a conservative course and decided that some of the business trip expenses would cause them tax problems if they claimed them as business expenses. However, they did the right thing, and reimbursed your spouse for them and then also paid the estimated taxes on the extra income. I suggest your spouse talks to her company's HR folks about this and gets a better explanation that you both can understand.

In the mid 90's, the company I worked for had the bright idea of giving $50.00 gift certificates for local restaurants to particularly hard working employees as a thank you. The idea was that both the employee and his significant other would remember the special occasion more than a small bonus check. The program caused more trouble than positive benefits. One of the problems was the pay stub for the period of the gift showed an additional $65.50 as income. This was the $50.00 gift plus an additional $15.50 to cover state and federal taxes. The $15.50 was withheld to cover the expected 28% federal and 3% state taxes on the $50.00.

With the exception of a few people in the accounting department, and despite a written explanation that was handed out with the gift, nobody understood the finances of this. The HR department was getting many calls from honorees saying that their pay stub showed this extra money but it wasn't being deposited in their bank account and where was it. Some of them were convinced that they'd been robbed despite all of the explanations. For this and other reasons, the program was dropped after about a year.
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Re: Maybe turn down that business trip nex time...

Postby Jfet » Sun Apr 07, 2013 8:47 am

No, the $1600 definately went to pay for a tax firm to generate the report. The withholding part on the W2 would show this $1600 if it had gone to federal taxes (I added up all of the paystub taxes withheld and they match).
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Re: Maybe turn down that business trip nex time...

Postby SurfCityBill » Mon Apr 08, 2013 10:34 pm

My former company sponsored an incentive trip for our sales rep network every year. As part of sales management I was expected to go as one of several company hosts. While my wife did not have to go, they preferred she did since all the reps brought their wives. My wife's portion of the trip always appeared
on my W2 at the end of the year as taxable income. Taxes usually ran about $2,000. Considering we went to New Zealand, Argentina, Ireland, Tahiti, The Carribbean, Vienna, Budapest, and Hawaii, all first class, we've always felt like the $2,000 was money well spent. The company always claimed this was an IRS requirement.
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