Boeing Per Diem included in W-2

Boeing engineer on temporary location gets $24k in "location specific per diem" and $11k in " Per Diem Meals". They clearly are included in box 1 wages of W-2. He wants those same numbers on his 2106. I would guess that if I paid an employee $5 for a box of pencils and if the box 1 wages would have otherwise been $100, but because I paid her or him $5 for pencils and then made their W-2 to be $105, would that employee then have a right to show the $5 on 2106, flowing into Sch A?

I would guess so. (I am not even going into the possibility that his job here in my location might last 13-14 months before he is transferred back to the Washington state home office---which I think it might)

Thoughts?

Boeing engineer on temporary location

Is the job assignment more or less than one year?

Supposed to be less than 1 year, but that 1 year is up within 30 more days, and he says while he hopes to be transferred back in time, it might go over by a month. Again, he says all his counterparts CPA's say that all those Per Diems are employee business expenses reported on form 2106, so he says "why can't I". So, let's assume he does go back before the 1 year mark, I would guess that since the Per Diems are clearly included in Box 1 of W-2, they should be deductible.

(I hate to tell him that when Boeing moves him back to Washington, that the move will no longer be tax free and any future Per Diems will no longer have a 2106 to deduct them on)

I take that the per diems are treated differently than accountable expenses for hotels, meals etc.

Years ago a VP at a Fortune 50 company where I worked lived at a hotel rather than move and the company expensed all that cost. When you are a multi-billion dollar corporation a lot of things slip through. I don;t know why that person didn't just move in with his local mistress.

If Boeing uses the IRS per diems, they would count as being paid under an accountable plan. Maybe they use a higher rate. Or maybe employee didn't fill out the correct paperwork.

Agree sjr, but only the excess should end up on the W-2, right? I wonder if this one of the here is monthly $2k for lodging and $1K for meals, you are on your own.

That could be it.

Hard to believe a big company like Boeing would do that. But nothing anymore surprises me.

Not that what happened in mid to late 60's is relevant now, but at that time I was a pharmacist in law school. In the summers I covered summer vacationing and pharmacist shortages all over the state of Ohio for a major drugstore chain. I submitted expense reports for hotel and mileage. They allowed me $16 a day for meals so I just reported that amount per day. That never appeared on my W-2.

In those days I was paid $4.25/hr. I worked 70-80 hours a week. Then one week I saw a huge increase. Turns out someone at HQ determined they had to pay me time and a half for over 40 hours. They never made up for the year or so that they did not pay me overtime. With the couple 8 hrs days a week I worked for 9 months, and the 12 hours a day I worked in the summer I was making about the same as a full time pharmacist. No one with an undergrad political science major could come close to that.

Supposed to be less than 1 year, but that 1 year is up within 30 more days, and he says while he hopes to be transferred back in time, it might go over by a month. Again, he says all his counterparts CPA's say that all those Per Diems are employee business expenses reported on form 2106, so he says "why can't I". So, let's assume he does go back before the 1 year mark, I would guess that since the Per Diems are clearly included in Box 1 of W-2, they should be deductible.

(I hate to tell him that when Boeing moves him back to Washington, that the move will no longer be tax free and any future Per Diems will no longer have a 2106 to deduct them on)

My understanding of the rules is if the job was “supposed to be” shorter than a year when he took it, then he qualifies as working away from home and his expenses are deductible. If the assignment ends up lasting more than a year then anything AFTER the one year mark is no longer deductible. If the assignment was open ended from the beginning, then nothing is deductible....but that is not your case.

You mention the per diem is in box 1, is it also in box 3 and 5 too?

I'm sure I remember that there's a very carefully written regulation that is intended to let us know just when the "temporary" out-of-town assignment is no longer considered "temporary" and that that happens when it becomes evident [I have forgotten the carefully chosen description used in the reg] that the assignment won't be less than a year, and not when it - the assignment - actually becomes more than a year. That made no sense at all. I'll get back on this after I get back from the refrigpbrerator, which will take less than a year, I'm pretty sure. "Pretty sure" wasn't the term used in the regs to describe the expectation w/r/t the length of the "temporary" out-of-town gig, I'm pretty sure.

Boeing probably didn't err in the reporting. The code section that governs the application of tax home is §162 and the interpretation is based on Rev. Ruling 93-86 (as well as decades of court rulings). Firms like Boeing engage Big 4 to help them determine tax positions for both long-term and short-term assignments (and increasingly frequent business travelers) - used to consult these firms in my previous life. What surprises me is why this individual is not covered by Boeing's engagement with the Big 4 - from experience, he may have just fallen through the cracks and should go back to ask his HR contact, although this may mean RowTax would lose a client.

... there's a very carefully written regulation ...
... that the assignment won't be less than a year, and not when it - the assignment - actually becomes more than a year.

Did that carefully written reg. omit what to do when the assignment is neither more than nor less than a year, or was that an oversight after 11pm last night?

"...or was that an oversight...?"

It was certainly *not* an oversight, and I resemble your insulation. I chose consciously and with insight not to specify that particular because I wasn't ready to chase down a cite to a site where we could sight Uncle's intention about expectation.

And to prove it, I will concede that I was probably overly certain about my certainty about the regulation. It seems to have been that Revenue Ruling 93-86, and not the regulations, that provides what's provided, about Uncle's "realistic expectation" criterion.

gmhksgp should chime in more often!

Rev. Rul. 93-86 was issued to clarify the application of §§1.911-2(b), which stipulates that tax home for the purpose of foreign earned income exclusion has the same meaning as §162(a)(2). It offers nothing new except to provide definitive guidance as to how prior case laws related §162 would apply within the context of §911. In the absence of a revenue ruling, tax professionals would have had to draw parallel from previous case laws and take a tax position, which they would then need to defend.

Thanks for the invite, Harry. Have been offline for quite a while and will try to chime in more often

You both "forced" me to look it up. The rev rul draws the line at "1 year or less" and "more than one year". It also goes into some background on how it got there, including that, in circumstances where the worker sleeps works around, he may be called an "itinerant", which would offend me if I were he.

LOL, itinerant is one where I think there is some risk as telecommuting offered by employers (but only as an option to attract talent) becomes more common. Some of these telecommuters who spend a substantial amount of time overseas are led to believe that they should be eligible for foreign earned income exclusion, without first examining the employment terms and the facts pursuant to landmark cases such as Commissioner v. Flowers, 326 U.S. 465, 467 (1946).

This also opens a can of worms from a SALT perspective (with NYS leading the charge), which could expose employees to double taxation, not to mention complexities with payroll reporting, and questions of whether a taxpayer should be eligible for away from home business expense deductions under §162 as well as the tax consequences from the reimbursement of such expenses.

Going back to the original question, however, I still believe that Boeing is right in including the per diem allowance as taxable income. It would be advisable to cross check that against when the intention changed though. Also, I would question whether any foreign tax was or is to be paid. If so, it would make even more sense for Boeing's tax service provider to prepare the return as the FTC for foreign tax paid by Boeing would belong to Boeing and tax equalization policies generally dictate that the tax equalization calculation would be prepared based on the company's tax position even if the assignee had someone else prepare the return with a contradictory position.