Question about providing lodging to an employee

[MagnifyMobile]

What is the name of your state (only U.S. law)? New Jersey

We have an employee who is a software developer for our company. We are looking for ways to provide this employee with some fringe benefits that will not create a tax liability for him. We have been researching the subject of providing lodging to an employee, some resources say that the rent will have to be claimed as income for the employee, others say this can be exempted if the rental is on the "business premises".

When I think about "business premises" I think about any property that we either own or are renting on a commercial lease for our company. An example would be we have offices that we rent, and we also have a main office that we own.

Obviously if we we're to tell this employee to rent a property under his name, and we pay the rent, this would have to be claimed as income for the employee. Now I also know that many companies rent executive apartments that are not permanent residences, but are used as temporary places to stay for traveling employees for different purposes.

The question I have is what if we we're to rent a house on a lease that is written out to the company, meaning our company is listed as the renter. The employee would not be on the lease, but we would "allow" the employee to stay in the home. Is this a situation where the employee is not required to claim the rental as part of his income. Also keep in mind that this employee performs his work from home, so basically this would be a home/office.

If we rent a property, is that considered a "business premise"?

 

[davew128]

What you're looking for is a fringe benefit for the convenience of the employer and necessary for the employee to do his job. Nothing you describe even comes close. Think of something along the lines of a hotels employee who performs all building and room repairs and needs to be nearby at all times to do so. I can't think of a single reason why a software developer would need anything of the sort.

 

[MagnifyMobile]

So how does this work with companies that rent executive houses where traveling employees may stay temporarily? Is this taxable income just based on how long they are there, meaning if an employee stays in one of these houses for one month, you have to claim one month rent on taxes? What happens when these properties are vacant, is there tax liability there? If the property is rented in the name of the corporation, how does the IRS even determine the tax liability in the first place if the property has no legal ties to the employee?

Also in this case, this developer is the senior head of his department and is required to be on call 24 hours a day if we have system issues. There are cases when he has to get to his system very quickly even if it be at 3:00 in the morning, and having him distanced from access by having to drive to an office would be inconvenient for the company. So in our eyes this is to our convenience, because we have this employee at our disposal at any time.

 

[davew128]

Then you should probably hire somebody to research applicable caselaw and determine what should be done to make your situation work.

 

[LdiJ]

So how does this work with companies that rent executive houses where traveling employees may stay temporarily? Is this taxable income just based on how long they are there, meaning if an employee stays in one of these houses for one month, you have to claim one month rent on taxes? What happens when these properties are vacant, is there tax liability there? If the property is rented in the name of the corporation, how does the IRS even determine the tax liability in the first place if the property has no legal ties to the employee?

No, because again, that is for the convenience of the employer. If the employee has to travel to do his job, then the employer normally reimburses that employee for the travel expenses. It can save the employer considerable money to have the employee stay in an executive apartment rather than a hotel.

Also in this case, this developer is the senior head of his department and is required to be on call 24 hours a day if we have system issues. There are cases when he has to get to his system very quickly even if it be at 3:00 in the morning, and having him distanced from access by having to drive to an office would be inconvenient for the company. So in our eyes this is to our convenience, because we have this employee at our disposal at any time.

That might fly IF it is impossible or impractical for the employee to have access to the system from his home computer/company take home laptop. However, I have computer access to over 200 computers in 25 different office locations...so I know it can be done, and relatively inexpensively.

 

[MagnifyMobile]

Our company deals with highly sensitive information including bank account and credit card data. One of our policies is outside access is strictly forbidden, access to our systems is only permitted with company issued computers. We do not allow employees to access our network through their own computers or internet connections. People may call that impractical or paranoid, but it is our perogative to maintain security in a way that we see fit.

If we rent a property ourselves we will have control over the computer system, as well as the physical security of the home itself. We can choose what type of security system, as well as how it is installed. Let's just say we don't call ADT, all of our facilities are secured under UL-2 security standards, and this executives home would be no different. We are not really interested in opinion on whether or not someone thinks this is to our convenience, we know it is to our convenience because this is how we want this done. We want control from the top, bottom, left and right. That is why our company since it's inception has literally never been hacked, customer data has never been compromised, not even close.

There are several security issues not only on data, but on the security of our employee himself. He has control over a large percentage of our infrastructure, and he is the brains behind 99% of our software that makes us a lot of money. His security as well as the security of the data he manages is very important to us.

We understand that as a company we have a right to rent a property for the purpose of executive housing, and we have the right to let that property sit there unoccupied as long as we want. The question is, where is the line here? If we have a property and we tell an employee "go live here", is there something in 29 US code 119 that we missed as to how long he can stay there until it becomes income? Is this something like if he stays there for only a month it's fine, but if it's for a year he has to claim it? When he lives at this residence, are we required to report this information somewhere? Are we required to notify the government that he is residing there? I have read over 26 US code 119 and all I am seeing is that we have to fulfill the following obligations:

1. It has to be for the convenience of the employer (in this case it is)
2. The employee is required to accept the lodging as a condition of his employment (unless he has the amazing ability to arrive at our office in mere minutes, he will have no choice in the matter)

 

[TheGeekess]

Our company deals with highly sensitive information including bank account and credit card data. One of our policies is outside access is strictly forbidden, access to our systems is only permitted with company issued computers. We do not allow employees to access our network through their own computers or internet connections. People may call that impractical or paranoid, but it is our perogative to maintain security in a way that we see fit.

If we rent a property ourselves we will have control over the computer system, as well as the physical security of the home itself. We can choose what type of security system, as well as how it is installed. Let's just say we don't call ADT, all of our facilities are secured under UL-2 security standards, and this executives home would be no different. We are not really interested in opinion on whether or not someone thinks this is to our convenience, we know it is to our convenience because this is how we want this done. We want control from the top, bottom, left and right. That is why our company since it's inception has literally never been hacked, customer data has never been compromised, not even close.

There are several security issues not only on data, but on the security of our employee himself. He has control over a large percentage of our infrastructure, and he is the brains behind 99% of our software that makes us a lot of money. His security as well as the security of the data he manages is very important to us.

We understand that as a company we have a right to rent a property for the purpose of executive housing, and we have the right to let that property sit there unoccupied as long as we want. The question is, where is the line here? If we have a property and we tell an employee "go live here", is there something in 29 US code 119 that we missed as to how long he can stay there until it becomes income? Is this something like if he stays there for only a month it's fine, but if it's for a year he has to claim it? When he lives at this residence, are we required to report this information somewhere? Are we required to notify the government that he is residing there? I have read over 26 US code 119 and all I am seeing is that we have to fulfill the following obligations:

1. It has to be for the convenience of the employer (in this case it is)
2. The employee is required to accept the lodging as a condition of his employment (unless he has the amazing ability to arrive at our office in mere minutes, he will have no choice in the matter)

These are questions to be asking the company's CPA or Tax Attorney, not a bunch of random strangers on the internet.

 

[BigMouthWino]

Our company deals with highly sensitive information including bank account and credit card data. One of our policies is outside access is strictly forbidden, access to our systems is only permitted with company issued computers. We do not allow employees to access our network through their own computers or internet connections. People may call that impractical or paranoid, but it is our perogative to maintain security in a way that we see fit.

If we rent a property ourselves we will have control over the computer system, as well as the physical security of the home itself. We can choose what type of security system, as well as how it is installed. Let's just say we don't call ADT, all of our facilities are secured under UL-2 security standards, and this executives home would be no different. We are not really interested in opinion on whether or not someone thinks this is to our convenience, we know it is to our convenience because this is how we want this done. We want control from the top, bottom, left and right. That is why our company since it's inception has literally never been hacked, customer data has never been compromised, not even close.

There are several security issues not only on data, but on the security of our employee himself. He has control over a large percentage of our infrastructure, and he is the brains behind 99% of our software that makes us a lot of money. His security as well as the security of the data he manages is very important to us.

We understand that as a company we have a right to rent a property for the purpose of executive housing, and we have the right to let that property sit there unoccupied as long as we want. The question is, where is the line here? If we have a property and we tell an employee "go live here", is there something in 29 US code 119 that we missed as to how long he can stay there until it becomes income? Is this something like if he stays there for only a month it's fine, but if it's for a year he has to claim it? When he lives at this residence, are we required to report this information somewhere? Are we required to notify the government that he is residing there? I have read over 26 US code 119 and all I am seeing is that we have to fulfill the following obligations:

1. It has to be for the convenience of the employer (in this case it is)
2. The employee is required to accept the lodging as a condition of his employment (unless he has the amazing ability to arrive at our office in mere minutes, he will have no choice in the matter)

It sounds like you have a good opportunity to provide the fringe benefit and deduct it from the corporate income. It is up the employee to handle their taxes correctly; they may very well owe taxes on all or part of the benefit - but that is not YOUR problem.

 

[davew128]

It sounds like you have a good opportunity to provide the fringe benefit and deduct it from the corporate income. It is up the employee to handle their taxes correctly; they may very well owe taxes on all or part of the benefit - but that is not YOUR problem.

100% INCORRECT. If its a taxable fringe benefit, that makes it WAGES, reportable on the W-2 and oh by the way, subject to payroll taxes by the employer.