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Old 03-18-2014, 03:27 PM
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Stipend, wages, and taxes

I am wondering about the tax implications of having a full time employee who receives a normal w2 for hourly wages but is also paid a monthly stipend for personal vehicle use as well for his home office/electricity/internet. I know the stipend income in taxable for him but is there any benefit to the employer for having the payroll split between wages and stipend vs having it all as wages?


Thanks in advanced!



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Old 03-19-2014, 05:08 AM
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Originally Posted by fendereff View Post
I am wondering about the tax implications of having a full time employee who receives a normal w2 for hourly wages but is also paid a monthly stipend for personal vehicle use as well for his home office/electricity/internet. I know the stipend income in taxable for him but is there any benefit to the employer for having the payroll split between wages and stipend vs having it all as wages?


Thanks in advanced!
I should put his way. Simply speaking, amounts /stipend for biz related expenses paid under accountable plans are not income to your EE and are not shown on EE’s W-2so no soc sec tax w/h required as it si not EE’s wage.But the ER can still deduct it on his return as biz expenses. So not taxable to EE but deductible for ER and ER does not need to w/h soc sec tax on the stipend.On the contrary,amounts paid under nonaccountable plan are income to the EE and must be included in EE’s wages with appropriate tax withholdings. So it is taxable to EE(and ER needs to pay a matching amount for a combined contribution of 15.3% of earnings)and still deductible for ER as biz exp on Sch C of 1040. An ER can have an accountable plan for some items, and a nonaccountable plan for others.



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Old 03-19-2014, 10:45 AM
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Originally Posted by Wnhough View Post
I should put his way. Simply speaking, amounts /stipend for biz related expenses paid under accountable plans are not income to your EE and are not shown on EE’s W-2so no soc sec tax w/h required as it si not EE’s wage.But the ER can still deduct it on his return as biz expenses. So not taxable to EE but deductible for ER and ER does not need to w/h soc sec tax on the stipend.On the contrary,amounts paid under nonaccountable plan are income to the EE and must be included in EE’s wages with appropriate tax withholdings. So it is taxable to EE(and ER needs to pay a matching amount for a combined contribution of 15.3% of earnings)and still deductible for ER as biz exp on Sch C of 1040. An ER can have an accountable plan for some items, and a nonaccountable plan for others.

Thank you for that information. VERY helpful! I did some research on accountable vs non-accountable plans and would really like to use an accountable plan. Makes the most sense and has the most benefit to both myself and employee. The IRS doc I found mentions this as the first requirement for an accountable plan:

They must have paid or incurred deductible expenses
while performing services as your employees. The re-
imbursement or advance must be paid for the ex-
pense and must not be an amount that would have
otherwise been paid by the employee.


So what I am looking at is paying a form of reimbursement for a percentage of rent, insurance, electricity, water, and internet. The internet will be used 100% for business and nothing else as he has personal internet (not suitable for the kind of work I will have him doing). The rest of those items would be split use as expected for a home office.

Would I be correct in assuming that these deductible items of rent, insurance, electricity, and water would not fall under accountable because he would be paying them anyway if he was not working at home (though they will increase)?

Also, I am unsure on what that would look like since the internet will be 100% business. Would I take (Rent+Ins+Elec+Water+Internet)x(sq ft %)x(12)? Or would I do ((Rent+Ins+Elec+Water)x(sq ft %)+Internet)x(12)?

Thanks again in advanced!



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Old 03-19-2014, 11:51 AM
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Originally Posted by fendereff View Post


#1;Thank you for that information. VERY helpful! I did some research on accountable vs non-accountable plans and would really like to use an accountable plan. Makes the most sense and has the most benefit to both myself and employee.

#2;So what I am looking at is paying a form of reimbursement for a percentage of rent, insurance, electricity, water, and internet. The internet will be used 100% for business and nothing else as he has personal internet (not suitable for the kind of work I will have him doing). The rest of those items would be split use as expected for a home office.



#3;Would I be correct in assuming that these deductible items of rent, insurance, electricity, and water would not fall under accountable because he would be paying them anyway if he was not working at home (though they will increase)?

#4;Also, I am unsure on what that would look like since the internet will be 100% business.


#5;Would I take (Rent+Ins+Elec+Water+Internet)x(sq ft %)x(12)? Or would I do ((Rent+Ins+Elec+Water)x(sq ft %)+Internet)x(12)?

Thanks again in advanced!
#1;agreed

#2;correct.

#3;correct;basically, whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction. I guess it depends;some states require all employers to reimburse employees for any business expenses they incur "in direct consequence of the discharge of [his or her] duties". This applies to all employees in those states regardless of where their employer is headquartered. These rules are especially relevant for employees who work from a home office. For example, your EE may be entitled to reimbursement for his/her home office. All employees should keep in mind that these rules apply even if they do not work exclusively from a home office. If you regularly work at home on the weekends in your home office, it is quite possible that you are also entitled to reimbursement for these expenses from your employer, although to a lesser extent.unless your ee works/uses his home as biz related office, no reimbursement is needed.


#4;this is exclusively direct expenses that is 100% bdductible.


#5;you need to figure how many square feet of your home is dedicated to the exclusive use of your biz and .take the total square footage of your home and mathematically decide the percentage. As an example--if your house is 2k square feet and your office is 200 square feet, you will multiply your expenses by 10 percent to get your deduction. Track your home expenses from January through the end of the calendar year. And you should keep a written record-you will need it when figuring your taxes for the year.also, take the total from adding your home expenses and multiply that number by the same percentage you got when figuring the portion of your home's square footage. This is the number to claim on the home office expense deduction tax form.



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