I've never heard the term, but recently was provided the policy of a very large, global consulting firm relating to the issue of travel expenses. It's too large to post the entire policy here.
In summary, they include Per Diem Reimbursements of travel expenses in the W2's of employees and then gross-up the withholding amounts to reimburse for the additional taxes incurred.
The policy they follow defines the the current tax home as the assignment location if the assignment is reasonably expected to last one year, or more. In addition, all part-time assignments that are greater than 50% per month are considered full-time assignments. As such, if a part-time assignment is expected to exceed one year and the individual expects to work in the location greater than 10-days per month all travel-related expenses for this assignment are taxable.
The policy also discusses IRS guidelines on "restarting the clock" related to applying the one year rule for compensatory status. It indicates those consultants that join a project full-time (including part-time assignments exceeding 50 percent) will need to consider all previous time spent in the projects metropolitan location in determining whether there is an expectation the one year rule is exceeded.
In addition, the policy defines an individual's residence as the tax home if the home is less than 2-1/2 hours from the office by auto or rail, and they intend to work in the area of the home office more than 35 days a year (and indicate this is per IRS policy), but indicates it may not be the same as the current tax home for tax purposes.
Since the employees withholding is grossed-up, I'm not sure they care about the definitions. But, it seems like the policy is awfully conservative, and would result in additional employment taxes. I've also never read anything discussing a 35-day rule in the IRS rules.
What do you think?
In summary, they include Per Diem Reimbursements of travel expenses in the W2's of employees and then gross-up the withholding amounts to reimburse for the additional taxes incurred.
The policy they follow defines the the current tax home as the assignment location if the assignment is reasonably expected to last one year, or more. In addition, all part-time assignments that are greater than 50% per month are considered full-time assignments. As such, if a part-time assignment is expected to exceed one year and the individual expects to work in the location greater than 10-days per month all travel-related expenses for this assignment are taxable.
The policy also discusses IRS guidelines on "restarting the clock" related to applying the one year rule for compensatory status. It indicates those consultants that join a project full-time (including part-time assignments exceeding 50 percent) will need to consider all previous time spent in the projects metropolitan location in determining whether there is an expectation the one year rule is exceeded.
In addition, the policy defines an individual's residence as the tax home if the home is less than 2-1/2 hours from the office by auto or rail, and they intend to work in the area of the home office more than 35 days a year (and indicate this is per IRS policy), but indicates it may not be the same as the current tax home for tax purposes.
Since the employees withholding is grossed-up, I'm not sure they care about the definitions. But, it seems like the policy is awfully conservative, and would result in additional employment taxes. I've also never read anything discussing a 35-day rule in the IRS rules.
What do you think?