I live in Baltimore. Last year my company assigned me temporary work opening our new Atlanta location to get it up and running. I expected that it would be for six to nine months. I’ve now been in Atlanta 15 months and hope to return home next month. I’ve been told that since the assignment lasted longer than a year it was no longer considered temporary, and I would be taxed on all my reimbursed living expenses while in Atlanta. Is that correct? I still have a home and family in Baltimore. We have no intentions of moving.
There are two common situations that involve temporary living expenses. If your company has provided you a relocation package where they are providing you a place to live while you and your family look for a home in your new city, the money you employer pays for your temporary housing are fully taxable and will be reported on your W-2.
If you go to a different city for work with the intention of returning home after a few months, the reimbursement for your temporary housing is fully excludable from income for the duration of your stay. However, if your employer extends your stay to more than a year, the IRS considers your stay permanent, and you will be taxed on reimbursements from the day the decision was made to extend your assignment beyond one year.
Let’s say you came to Atlanta in June 2013 and expected to leave in March 2014. If the decision was made to stay until September 2014 in March, you would be taxed on the reimbursement of your living expenses from March 2014 to September 2014. However, if in March, your assignment was extended until June 2014, then in June, you were asked to stay until September, your taxable temporary living expenses would be from June 2014 to September 2014.
If you have questions regarding your tax situation the experts at Henssler Financial will be glad to help: