I moved 90 miles away but commute to work; my employer gives me $500 a month to cover motels a few nights a week

[rickieg12]

I moved 90 miles away but commute to work; my employer gives me $500 a month to cover motels a few nights a week.

My workweek changed from 5 days to 4 days. so i commute on Tuesday and come home Friday. Otherwise I would have to commute all four days. it's about 90 miles each way and takes 2.25 hours.

I was paying for myself one of the three days but i can't afford it anymore.

so a friend has a 'man-cave. he said i can stay there three nights a week and would charge me $500 which i would hope to get reimbursed.

my employer is saying that there may be a time-limit on how long i can get reimbursed if I am paying for a residence here.

question: can i get reimbursed for the use of the man-cave?  if so how long?

Rick

[PerryR]

How about the Employer pays the Man-Cave landlord directly, bypassing the reimbursement juggernaut? 

[MarilynG1]

If you are a W-2 employee, expenses like this are no longer deductible on your tax return, since the new tax laws took effect in 2018. 

It is up to your employer and their reimbursement policies to make this decision.

Click this link for more info on Unreimbursed Employee Expenses.

[Opus 17]

Commuting is never tax deductible.

If your employer is giving you a taxable stipend for commuting, that can continue as long as they agree and you can use the money for anything you want.  Basically, they are giving you a taxable raise or bonus to help with your expenses.  You pay the tax and use the money for anything you want.  There is no time limit on how long your employer can give you a taxable raise or bonus, it just depends on how valuable you are.

If your employer is giving you a non-taxable stipend, they are already breaking the law.  I'll try to break this down into parts...

1. Some definitions: "transportation" is local transportation including to and from your job.  "travel" is when you need to travel away from your tax home -- where you do most of your work -- defined as the broad geographic or metro area.
2. Under the law before the 2018 tax cut and jobs act, you could deduct work-related travel as an itemized deduction subject to the 2% rule. Work-Related travel means travel away from your tax home, far enough that you need to stay overnight, for an assignment that is temporary--meaning expected to last and actually does last, less than one year.  
3. Your tax home is where you do most of your work and earn most of your money.  If you live in Richmond VA and commute to Washington DC every day, your tax home is Washington DC.  You could deduct travel to a conference in New York or a temporary assignment in Baltimore, but you can't deduct your commute.  That's just how you choose to live.  (You also can't call a work trip from Richmond to Petersburg as "travel" -- they're just too close.)
4. Although the TCJA eliminated the itemized deduction for work-related travel on your personal tax return, employers can still reimburse employees tax-free for work-related travel, using the same definition of "travel".  (Away from tax home, temporary.)  And the employer can deduct the expense on their tax return as a business expense.  (This is only allowed with an accountable plan, where the employee proves their expenses with receipts.)
5. Your living arrangements are not travel.  The employer can give you certain tax-free commuting benefits only as specified in law.  They can give you a pre-paid transit card if you need to take the subway or bus to work, for example.  But hotels and man-caves because you don't want to make a 2.5 hour commute is not included in the allowable fringe benefit for commuting expenses. 
6. Therefore, the employer can reimburse you for commuting expenses if they want to, but they must treat it as part of your taxable compensation.  They can't reimburse you tax-free for commuting, because it is not a legitimate work-related expense for you or for them. 

I go into this detail because you mention the employer said something about a time limit.  So I suspect that they are getting the "travel" and "transportation" rules mixed up. 

So bottom line for you and the employer:

If they give you a commuting stipend and make it part of your taxable wages, they can pay it as long as they want and you can spend it however you want.  If they give you a non-taxable stipend, they are in non-compliance, and you are too, technically.  (If you were audited, you would owe income tax on the stipend, although they might be generous and not assess a penalty if they accept it wasn't your fault.)

[Opus 17]

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@PerryR wrote:

How about the Employer pays the Man-Cave landlord directly, bypassing the reimbursement juggernaut? 

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If the employer pays for housing for the employee, that is a taxable benefit.  The value must be included in the employee's W-2 and subject to employment taxes.  Free housing is not a deductible or non-taxable benefit unless it is on the employer's premises for the convenience of the employer (such as, employee is a security guard or the operator of a critical system who must be on call and instantly available 24 hours a day).

[PerryR]

There are many, many employers who regularly expense lodging for their employees (traveling), potential employees (traveling, interviewing), vendors (selling), customers (buying), etc. For large corporations specifically, it is not uncommon to see lease/rent expense for apartments on the income statement (or balance sheet if the lease is capitalized). My experience is if these expenses were scrutinized in an audit, the issue comes down to Management's ability to persuade the Revenue Agent(s) the expense is "ordinary, necessary." This determination, of course, is on a case by case, facts, and circumstances basis.  If it's determined not ordinary or necessary the outcome is for the employer to classify the sum as an "in-kind" benefit and added to W-2.  I think the point is: Post TCJA it is best, if possible, for the employer to pay these expenses directly...

[rickieg12]

I am told that my current arrangement they get a tax savings of about half would they get a tax savings if they just paid it directly

[AmyC]

It does not matter if they pay you or the landlord as long as they can prove the benefit.

[Opus 17]

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@PerryR wrote:

There are many, many employers who regularly expense lodging for their employees (traveling), potential employees (traveling, interviewing), vendors (selling), customers (buying), etc. For large corporations specifically, it is not uncommon to see lease/rent expense for apartments on the income statement (or balance sheet if the lease is capitalized). My experience is if these expenses were scrutinized in an audit, the issue comes down to Management's ability to persuade the Revenue Agent(s) the expense is "ordinary, necessary." This determination, of course, is on a case by case, facts, and circumstances basis.  If it's determined not ordinary or necessary the outcome is for the employer to classify the sum as an "in-kind" benefit and added to W-2.  I think the point is: Post TCJA it is best, if possible, for the employer to pay these expenses directly...

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I will concede that I don't know enough about when the employer can deduct employee lodging as a business expense.  

However, looking at publication 15-B, lodging on premises is only sometimes allowable as a non-taxable fringe benefit.  

And if any employer could provide tax-free housing at any time, the atheists would not be suing to block the special treatment of clergy housing.

I find the following:

Employee housing benefits can be non-taxable to employees if all three of these conditions are met:

• The housing is provided on the property owned by the business or employer
• The housing is provided for the convenience of the employer. The employer must have a "substantial business reason" for this, such as a remote work location.
• The employee must accept housing as a condition of employment. A condition of employment is an agreement at the beginning of employment by both employer and employee.

Here, at 2 of the 3 conditions fail.  The housing is not on premises, and the employee moved after being hired so accepting it wasn't a condition of employment.

As best I can determine, if the employer directly pays for lodging, the value must be included in the employee's taxable wages.

That being the case, it is equivalent as far as I can tell, for the employer to pay the landlord, or for the employer to pay the employee an extra cash stipend.  The tax treatment is identical.

https://www.thebalancesmb.com/when-is-employee-housing-taxable-to-the-employee-4158182

https://www.mossadams.com/articles/2014/october/employer-provided-housing

[Opus 17]

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@rickieg12 wrote:

I am told that my current arrangement they get a tax savings of about half would they get a tax savings if they just paid it directly

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As long as the value of the housing in included in your W-2 wages, and is subject to federal, state, social security and medicare tax withholding, then I have no issues.  And I don't have the expertise to tell if they save more on their own taxes one way or the other.   But the housing must be taxable to you one way or the other.  

Going back to your original question:

• Can you get reimbursed for the man-cave?  Yes, as long as it is included in your taxable income.
• For how long?  As long as the employer wants to put up with the arrangement. 

[rickieg12]

it sounds like my employers are talking about #4 with my current arrangement: ...And the employer can deduct the expense on their tax return as a business expense.  (This is only allowed with an accountable plan, where the employee proves their expenses with receipts.). i provide receipts at the end of the month, and they do direct deposit.

from their thinking, I provide enough of a benefit to the company as to pay expenses so that I am "fresh" at work.

The reason I moved away is to be near my mom, who friends say was having memory issues. while i suppose this situation could be temporary, it may be a long-term issue. She's is losing memory but is still high functioning (she worked the election tuesday) with some noticeable failings.

i appreciate your thorough response. i don't want to "mess with the irs". i'm not looking to get a tax break but if my employer thinks they are getting a tax break but then doesn't get one (i've been getting reimbursed for about a year), that would be a bad thing.

i'm really not to sure what to do. i could probably just quit and get a job near where i live but I would definitely make less money. or just let things be which doesn't seem to be the right thing to do, especially if there is a possibility of incorrect tax situations.

[Opus 17]

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@rickieg12 wrote:

it sounds like my employers are talking about #4 with my current arrangement: ...And the employer can deduct the expense on their tax return as a business expense.  (This is only allowed with an accountable plan, where the employee proves their expenses with receipts.). i provide receipts at the end of the month, and they do direct deposit.

Although I am willing to be proven wrong, I think that this sort of arrangement is not allowed.  It doesn't make sense that the IRS would have specific rules on tax-free employee housing, and then look the other way when an employer used "necessity" to justify providing tax-free housing that doesn't follow those rules.

However, this is much more their risk than yours.  If they are willing to continue the relationship I would probably not barge into the CEO's office and demand that they start taxing you.  And you should not rely on the advice of anyone who you haven't paid for a professional opinion who will cover you with their errors and omissions insurance, especially someone on the internet who could be almost anyone, anywhere, with any or no credentials. 

Since I think they are doing it wrong, my answer for "how long can they keep doing it" is "as long as they want to."

[PerryR]

Champ, I believe, is right on this one.  It pays to read the details.  Isn't the key factor the fact that the employee chooses to move....not required to move by the employer.  It seems unreasonable to have the additional cost ($500/month) be subsidized by all other taxpayers.