Question about compensation and taxes

I am currently seeking employment and the answer to my question is going to affect how I approach compensation negotiations in the future.

I am seeking a postion that allows me to live onsite, either as part of salary; or with a housing discount. Do I need to claim either the market rent/discounted rent as INCOME when I file my tax returns for the year? What if the company policy requires me to live onsite and I am compensated with a monthly salary, performance bonuses AND a unit onsite?

Regardless of whether or not ONSITE living is mandatory by company policy; I need to have a position that includes housing.

If you are in this situation; can you tell me what you need to do in order to not hide anything from the friendly Income Reduction Service?

Hey Johnny,

Free or discounted rent for employees living on site are supposed to be counted as income. The company you work for should issue you a 1099 for this income.

However, if the company is not issuing 1099's, then I am not sure how you would report it. I haven't heard of anyone who without a 1099 voluntarily asked the IRS how to include it in their taxes.

I would ask your potential employer how they handle it because I have worked for companies that 1099 and others that do not. I also want to add that I am not a CPA, so my response is only from my personal experience.

Great recommendation Jennifer to consult with your CPA. I believe there were some guidelines under the IRS code that were changed a few years back allowing for a 20% discount. There were a few management companies and/or owners that got into trouble a few years ago by giving away a free apartment and not reporting it as compensation. The problem that arose from this was they not only fined the management companies, they went back and charged the employees with taxes and back fees/penalties.

I have heard of employers saying to employees not to worry about it, however, we do need to make sure it is handled in accordance with IRS guidelines or we could end up paying not only the back taxes but the penalties as well. Even utilities can be considered compensation and you could be taxed on it as well.

Is there a plain english explanation of the tax code that discusses this?

If the compensation is to include the rent 100%, should I ask my employer for a 1099 MISC form that reflects the full market rent for the time I am there ($x rent at y months)?

For the last several years, as a result of a prior employer not withholding ENOUGH funds; I have been directing them to withhold EXTRA (claiming ZERO exemptions, and asking that an additional $100 per month for Fed and for CA) be taken. 2009 tax year resulted in a refund of over $3000, as opposed to the employer that did it wrong and cost me a lot of money.

If you are living on property for the benefit of your employer - your apartment/utilities etc. are not taxable on a federal level.

In Washington State - we are required to report PAYMENT IN KIND (PIK) for unemployment and labor/industries hours. The state provides an hourly wage each year. We add up all the non-monetary compensation and divide it by the hourly wage for that year. That number is reported in the hours report for the state.

Jeannie Reynolds
Regional Manager - Properties

PS: I'm looking for experienced property managers @ our AAA+ properties in Spokane/Cheney, Washington. If interested, fax resume to (509) 483-4966.

Check out: www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf

According to this publication from the IRS the only allowable non-taxible discount is 20% under what is called "Qualified Employee Discounts." Here again, I am not a CPA and recommend you talk to your accountant. This topic has been a point of question for a long time, especially after several major property management companies got into trouble several years ago. As I read it, anything over 20% is to be taxed. The word "generally" in the statute is of course up to interpretation as is a lot of things the government does.

I am in the Sacramento, CA area; not looking to relocate... But if you have opportunities in my area, let me know....