My apologies if this has been posted before. I looked around and didn't see anything that looked similar. This is a bit complicated, but here's the short version:
My wife and I separated back in August. Shortly after, I took a new job that involves lots and lots of travel. The original plan was for me to have a base of operations somewhere and to be on the road four or five days a week. The reality of things, though, is that I'm on the road constantly. When I say constantly, I mean that I've spent one night since August 1st NOT in a hotel. This is seriously throwing off the travel budget that my boss and I came up with a few months ago and this can't last forever. Here are my questions:
I'm thinking a fair split of expenses/travel budget would be for my company to cover my hotel rooms, since I'm on the road in a different city every week, and for me to pay for food, since I'd have to eat anyway. Do you think that's reasonable?
Is it fair for me to expect my company to cover hotel rooms on the weekend? I could go to a friend's place or my mother's place on weekends, but that would require a round-trip plane ticket every weekend to the tune of at least $200. If I did that, I would fully expect my company to pay for the plane ticket. That's what they would do if I were traveling three or four days a week from my home, so I don't think it unreasonable to expect the same if I'm on the road Monday through Friday. Right?
I am, for all intents and purposes, homeless. My things are in a storage unit in California, and I have no intention of moving back to California. At this point, I can "live" anywhere I want to. I think I'm going to use my mother's address as my "residence". That gives me a mailing address in Arkansas, which has a reasonable income tax, and a rent-free place to crash on the rare occasion I'm not on the road. Should I consider a state with no income tax? I'd rather not disclose my salary if I can avoid it, but take my word for it when I say that saving the 7% income tax from AR by moving to a 0% state would not be enough to pay rent at a reasonable place (In my mind, $500 will get you a reasonable place in most parts of the country. That means a salary of ~$87k before it becomes an issue). Currently, I have personal possessions in Arkansas, Colorado, and California. I believe that means I can claim residency in any of those three states for tax purposes. Is that right?
My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. That would leave all decisions about lodging and food to me. That would also raise me from the 25% to the 28% tax bracket federally. Are there any advantages or disadvantages to this that I may not think of?
On a side note......as I, mentioned that my wife and I split up. She's sending the divorce papers to me next week. We're filing a joint petition for summary dissolution of marriage in California. As I understand it, this takes several months once the paperwork is started. The date the marriage ends is the date the final paperwork is complete, right? My question is, we would still benefit from filing 2009 taxes as married, right? If there is a significant advantage to waiting a month, I can probably convince her to wait.
Trying to push expenses the business should be covering to you as "salary" sounds extremely crappy and kind of sketchy. If a company expects you to be on site somewhere other than your home for all of the working days in the week, they better be paying the plane ticket to and from each week. They should cover that, OR the hotel rooms over the weekend if you have a particular interest in staying in the city you are at. If you do get any expenses pushed to salary, you better make sure they are grossed up.
Agree with pthor1231; I dont see why boss wants to push the travel expenses into salary. Remember that anything part of salary will be subject to SS, medicare and federal/state income taxes. Reimb. of travel expenses are for the most part free of all taxes.
From your post, I gather that the company is unable to pay ALL your travel expenses (normal hotel room, per diem for meals etc.) and is asking that you bear some of it. If you agree, just set a reasonable reimbursement rate (say, $10/day for food or $50/day for hotel, $0.10/mile for personal automobile etc.) that the company can pay and something you can live with. Try to cut down on travel expenses to the extent possible (e.g., staying is less expensive hotels etc.). But ultimately, take it as a travel expense reimbursement.
Note also that, your unreimbursed travel expenses can be deducted on your taxes. I dont know all the details/requirements but hopefully someone can fill-in or read in the IRS pub. At a minimum, keep meticulous record of your expenses and reimbursements.
ETA: I dont think you can simply change your state of residence and not pay taxes to the state where your job is located. The company is still required to withhold your state taxes where it is located and you may have to file as a non-resident if you claim residency in a different state. Depends on what state(s) we are dealing with but it is not as simple as say claiming TX residency and not paying any state taxes.
Xnarg
Senior Member - 5K
posted: Nov. 16, 2009 @ 6:14p
A per diem rate of $10 for food might buy breakfast in a large hotel.uutxs said: ....ETA: I dont think you can simply change your state of residence and not pay taxes to the state where your job is located. The company is still required to withhold your state taxes where it is located and you may have to file as a non-resident if you claim residency in a different state. Depends on what state(s) we are dealing with but it is not as simple as say claiming TX residency and not paying any state taxes.Actually, it IS that simple, or close to it.
The company does NOT have to withhold taxes for the state in which it is located, but for the state in which the employee claims his primary residence. And, the IRS is rather generous in that it lets the employee determine is primary state of residence.
He may have to actually justify residency at some point, but if he gets all his bills there, stores his belongings, etc., then he probably has a case for whatever state he chooses.
SecondGunman said: My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. If possible, for the same "real" after work-related expenses salary, you should have your company pay as much travel expenses as possible. Why? The first dollar of expenses reduces income tax for your company if paid by the company. And if paid by you, the expenses up to 2% of your AGI is not deductible (if you itemize).
As I understand it, since I'm a field sales rep who does not work out of the home office, and has never worked out of the home office, the company is required to withold income tax for whatever state I live in. I don't know that to be true, that's simply my understanding. Having worked in a company with more than a dozen field staff before, that was my understanding then also. I'm not saying I'm right and you're wrong, I'm just trying to clarify that.
This is a small company and, yes, they are trying to minimize expenses. Unfortunately, the fact that I don't really have a home also makes this a pretty unique situation. Normally, I'd work Monday through Friday and go home on weekends, with the company paying for airfare. Since I don't have a home, the boss is naturally wondering if he should be paying to keep me in a hotel all weekend........ Maybe asking how to get the most benefit isn't exactly the right way to phrase it. First and foremost, I need to make sure I don't get screwed in this. As has already been mentioned, if he were to increase my salary and expect me to cover some expenses, there are tax implications to that. If things go that way, I'm very quickly going to get in over my head and will need professional help.
In the end, anything that I'm not reimbursed for by the company is something I would deduct on my taxes at the end of the year. What else should I watch for or be made aware of?
nycll said: SecondGunman said: My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. If possible, for the same "real" after work-related expenses salary, you should have your company pay as much travel expenses as possible. Why? The first dollar of expenses reduces income tax for your company if paid by the company. And if paid by you, the expenses up to 2% of your AGI is not deductible (if you itemize). That was so far over my head that I didn't even feel the breeze.........
Xnarg said: Actually, it IS that simple, or close to it. The company does NOT have to withhold taxes for the state in which it is located, but for the state in which the employee claims his primary residence. And, the IRS is rather generous in that it lets the employee determine is primary state of residence.
He may have to actually justify residency at some point, but if he gets all his bills there, stores his belongings, etc., then he probably has a case for whatever state he chooses. That was, more or less, my understanding.
Xnarg said: A per diem rate of $10 for food might buy breakfast in a large hotel. I dont dispute that (indeed it may only be a "budget" breakfast for $10 in some hotels). I sure would like a $100/day food budget. But looks like OP is being given limited options regarding the total travel budget and seems willing to accept a reduced reimbursement.
Xnarg said: uutxs said: ....ETA: I dont think you can simply change your state of residence and not pay taxes to the state where your job is located. The company is still required to withhold your state taxes where it is located and you may have to file as a non-resident if you claim residency in a different state. Depends on what state(s) we are dealing with but it is not as simple as say claiming TX residency and not paying any state taxes.Actually, it IS that simple, or close to it.
The company does NOT have to withhold taxes for the state in which it is located, but for the state in which the employee claims his primary residence. And, the IRS is rather generous in that it lets the employee determine is primary state of residence.
He may have to actually justify residency at some point, but if he gets all his bills there, stores his belongings, etc., then he probably has a case for whatever state he chooses. This may very well be that easy for a "field rep." kind of position that OP has. I am not familiar with those situations.
SecondGunman said: nycll said: SecondGunman said: My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. If possible, for the same "real" after work-related expenses salary, you should have your company pay as much travel expenses as possible. Why? The first dollar of expenses reduces income tax for your company if paid by the company. And if paid by you, the expenses up to 2% of your AGI is not deductible (if you itemize). That was so far over my head that I didn't even feel the breeze.........Ok, no problem!
Just compare the 2 scenarios:
1. You get $90K salary and you pay $10K non-reimbursed expenses out of pocket 2. You get $80K salary and your $10K expenses are reimbursed.
The tax bill is more or less the same for your company. But in case 1, not the entire $10K "work related expenses" are deductible. (Check our IRS form 2106). So you should choose scenario 2 and the company is more or less indifferent after tax.
pthor1231 said: Trying to push expenses the business should be covering to you as "salary" sounds extremely crappy and kind of sketchy. If a company expects you to be on site somewhere other than your home for all of the working days in the week, they better be paying the plane ticket to and from each week. They should cover that, OR the hotel rooms over the weekend if you have a particular interest in staying in the city you are at. If you do get any expenses pushed to salary, you better make sure they are grossed up.Tax law is actually pretty generous when it comes to companies that have employees constantly traveling on business. As long as you meet certain criteria, almost all of the expenses your company incurs moving you around, putting you up for the night, food, etc are not include in the employees salary. Last time I looked, this includes a per diem for food. It is going to be better for your company and better for you if they structure your compensation in a way that they are paying for your business travel expenses. There is no reason you should be paying those expenses which may be limited or non-deductible for you.
SecondGunman said: Normally, I'd work Monday through Friday and go home on weekends, with the company paying for airfare. Since I don't have a home, the boss is naturally wondering if he should be paying to keep me in a hotel all weekend........ So the issue is only regarding weekends, and being willing to pay for airfare to/from the worksite but not a hotel/meals over the weekend? I agree that expecting them to cover your hotel and food for a weekend just because you dont feel like going "home" is excessive.
Let them pay you a fixed "allowance" for your weekend travel home, then you can decide whether to actually fly somewhere or just put the money towards a hotel room in the area. Since you are not maintaining an actual home that you are being kept away from, kicking in a bit for weekend accomodations shouldnt be an issue for you.
And given your impending divorce, extra salary might bite you in the ass in another way - any alimony will be based on that higher salary, but company-paid travel would not be included in the income calculations.
jeremyn
Nerdy Member
posted: Nov. 16, 2009 @ 8:06p
You actually need to file income taxes in every state in which you do work. You will need to keep track of how much time you spend in each state and pro-rate your salary.
Nebster
Member
posted: Nov. 16, 2009 @ 8:12p
The way my company does it, if you are flying back to the same location the next week, you can just stay over the weekend and expense a ticket for a spouse or SO to travel to be with you. You cannot, however, receive a direct stipend to pay for weekend lodging unless you are on a "long-term long-distance" assignment, like in another country.
TheWags
Member
posted: Nov. 16, 2009 @ 8:16p
There are some big pieces of information missing here: where are you generally staying and generally flying, and what kind of budget do you have for hotels, food, etc.? When I traveled more for work, it was amazing how quickly the benefits of rewards programs added up when I was staying at expensive places or flying expensive segments. They still added up quick when you are staying in Motel 6s or flying $139 SW Supersavers but not as much.
My view is, no, it's not appropriate for them to be paying for you to stay over the weekends, especially because you are probably already getting INSANE rewards from all that traveling and flying. I knew some consultants who could basically fly all over the world repeatedly and stay free in the world anywhere for months at a time with all the points they had built up. I imagine sales reps might be in the same boat. Even if you are really staying at the cheapest places, you should be getting rich from all the rewards points if (and this is big if) you are getting all of your points. If you are, don't bite a gift horse in the ass - offer to pay for your weekends to keep this going, if you want it to. You can do so out of your points, easily. Consider asking them to give you credit for the situations in which you save them money by staying someplace during the weekend when you would otherwise have cost them an expensive flight. It is pretty common that you would be saving them money by staying for two nights instead of adding another round trip, so maybe point that out to them or propose some compromise related to that.
If you are getting the points, I would try to work with them to keep getting them. I think a reasonable but low per diem would be a good idea for this - if you can make them think that you are saving them money by eating your food cheaper than you would otherwise be, give it a go.
If you aren't getting the points, I wouldn't even entertain all this crap.
Like others have said, it is much better for you and them for this to be expenses and not salary - they are hoping to save money by making you eat the travel expenses.
Yes, I get all of my points/miles. It's one of the perks of the job. Marriott loves me. Even staying in $60-80 Fairfield Inn's, they add up fast. Thanks to the fall bonus promo, I'm probably going to put on 60-70,000 points this month.
I don't know what you mean when you ask where I'm generally staying and flying..... You could mean either what hotel/airline or what part of the country. To answer both. I fly with American mostly and I stay with Marriott hotels whenever possible. When I can't, I go with the cheapest option. Geographically, I travel all around the country. In the last three weeks I've been to or driven through CO, NV, IA, MN, WI, IN, IL, OH, PA, DE, MD, DC, VA, NC, SC, and FL. Over the next few months I'm heading to California from Florida by way of I-40. There will be some flying and some driving, but I don't know how much of each yet.
I'm with a startup company. When I say startup, I mean it's the two owners and me. One of the owners is a friend and was my boss for a couple of years at a previous job. When he started the company, he specifically asked me to come on-board. It's not like they're trying to screw me over or do anything illegal we're simply trying to minimize expenses in any way we can. We're all concerned about the company paying me to stay in a hotel on weekends, and I agree that the company shouldn't have to do this every weekend. As has been said, thoguh, this is a pretty sweet setup for me right now and I want to keep it going as long as possible. Yes, they could cut me off completely every weekend. My boss understands what I'm going through personally and knows that if things were different that I'd be going home every weekend or every other weekend. He also knows that he'd be paying for those plane tickets. He's being very sympathetic and is trying to be fair. I'm trying to balance between getting what I can the company and taking advantage of the company. Does that make sense?
Alimony isn't a worry Glitch99. We've both agreed that neither of us owes the other anything. We're basically taking what we came in with, splitting the few things that we've acquired during the marriage, and going our separate ways.
pyeed. I forgot a state.
biomedeng
Senior Member
posted: Nov. 16, 2009 @ 9:32p
jeremyn said: You actually need to file income taxes in every state in which you do work. You will need to keep track of how much time you spend in each state and pro-rate your salary. This is actually true to some degree. If your company is headquarted in CA but you work in NY 100% of the tiem they are supposed to withhold NY tax. Now say you work in one state but live in the next one over (common for cities near the border) they still withhold only for the state you work in (unless there is some tax agreement already in place between the two states). Now where it gets tricky is for people who travel consistently to different states. Generally there is a minimum number of days you work in a state to subject yourself to withholding and each state has their own level of agressiveness. My father (who does factory audits) spent over 30 days working in NY (lives somewhere else) and NY apparently is agressive enough my dad's HR department decided to require him to be subejct to NY withholding. Now that he is subject to withholding NY knows who he is and expects a correct tax return in which he pays NY tax based on the number of days he was there. He does not pay tax or file returns to any other state than his home state and NY, so either he spends below the minimum number of days in those states or those states are not as agressive about enforcing the rules. He did ask his boss for a bonus to cover the NY tax since the other auditors in his department who audit different states weren't subject to this "expense", but I am not sure if he got it. FYI there was a thread on here about working in different states and taxes several months back.
Unfortunately, California makes it tough to escape their grasp. Please see http://www.ftb.ca.gov/forms/misc/1015R.pdf and http://www.ftb.ca.gov/forms/2008/08_1031.pdf . It is good that you are going to a state with an income tax, though., since those forms will be filed as a resident of that state As long as you are distributing your property and break all of the recorded ties to California (property, voting, membership in local clubs, etc.) you should be fine.
LtWaldo
Thrifty Member
posted: Nov. 16, 2009 @ 11:20p
Green for an amicable divorce with no alimony!
As soon as I finish school, I definitely want to become a road warrior consultant, hopefully internationally.
TheWags
Member
posted: Nov. 16, 2009 @ 11:46p
Sounds like everyone's pretty sophisticated here. You're getting rich off the points, and you're not paying rent or any alimony, either. Maybe offer to buy all your own food, like you said, and keep everything else the way that it is.
Sounds like you've got more of a vest interest in keeping costs down, so work on your negotiating and you can do better with the hotels directly, or if you want to give up some points use Priceline and similar hotels. Try booking flights in advance and using discount airlines if your schedule is pretty set. If you really care how much you're spending you can get constant business travel to be pretty cheap.
If you pretend to have a permanent home, then if it's cheaper to stay over in a hotel for the weekend than RT plane to that city, then I don't think you're taking advantage of the company by having the hotel be paid for. If buying a RT tix is cheaper, then you should have the company pay for an amount up to that tix for the weekend and you pay the rest.
Keep in mind that plane tickets are usually more expensive if you fly in/out without Sat night stay. So your probably saving money on your weekday plane fare by not leaving on Friday night. Also factor in the cost of mileage/airport parking/cab etc. That normally wouldve accompanied going back and forth from your permanent home to airport.
mmyk72 said: Also factor in the cost of mileage/airport parking/cab etc. That normally wouldve accompanied going back and forth from your permanent home to airport.
Those had slipped my mind. It's the little things like this that I forget about sometimes.
SecondGunman said: I'm with a startup company. When I say startup, I mean it's the two owners and me. One of the owners is a friend and was my boss for a couple of years at a previous job. When he started the company, he specifically asked me to come on-board. It's not like they're trying to screw me over or do anything illegal we're simply trying to minimize expenses in any way we can. We're all concerned about the company paying me to stay in a hotel on weekends, and I agree that the company shouldn't have to do this every weekend. As has been said, thoguh, this is a pretty sweet setup for me right now and I want to keep it going as long as possible. Yes, they could cut me off completely every weekend. My boss understands what I'm going through personally and knows that if things were different that I'd be going home every weekend or every other weekend. He also knows that he'd be paying for those plane tickets. He's being very sympathetic and is trying to be fair. I'm trying to balance between getting what I can the company and taking advantage of the company.I think you're getting alot of responses which pertain to how things are done at large, established companies. Sounds like you and the owners are trying to maximize your unique circumstances.
What about a fixed amount per weekend day? Maybe $60-80? See what they're comfortable with, obviously it's much less than weekly flights. Don't nickel/dime them; you got a good thing going. And try to ensure all travel-related expenses are not included in salary.
sportal
Geeky member
posted: Nov. 17, 2009 @ 10:53a
Yes, do the necessary pieces to establish residency in a state without income tax. At 7% for AR, it is worth it.
Don't let them increase your salary and then reduce reimbursable expenses.
I would propose to your boss that they cover whichever is cheaper. Is it cheaper for the total travel expenses to and from your home location on the weekends, or is it cheaper to pay for your hotel room plus food over the weekend. Present both expenses added up in a spreadsheet to your boss side by side, so he can see that you are saving them money by giving them the cheaper option, and thus doing what is best for the company.
Then if you want to stay in that city for the weekend, and it costs more in hotel + food than the travel expenses to fly back home, you can choose to pick up the difference, realizing that you may be saving money out of your pocket by maintaining a different level of home (crashpad versus complete home).
Win win for everyone.
tazzy531
Senior Member - 4K
posted: Nov. 17, 2009 @ 11:37a
There was another thread on FWF a while back about how a guy put everything into storage, sold his house, and travels for work full time. I can't find the thread.
SecondGunman said: I'm with a startup company. When I say startup, I mean it's the two owners and me. One of the owners is a friend and was my boss for a couple of years at a previous job. When he started the company, he specifically asked me to come on-board. It's not like they're trying to screw me over or do anything illegal we're simply trying to minimize expenses in any way we can.
My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. That would leave all decisions about lodging and food to me. That would also raise me from the 25% to the 28% tax bracket federally. Are there any advantages or disadvantages to this that I may not think of?
It sounds like the startup needs some basic accounting advise. Paying expenses as salary is not a smart way to go about it. It may seem easier to the owner, because there will be less paperwork, but you'll be paying taxes on expenses, i.e your hotel will cost you $100, but you will get $100 minus tax. You and your company have a legitimate way to write off the expenses, save some $$$. Use it. If your boss wants to cap the expenses, agree on per-diem reimbursement for the food and hotel.
jdmetz
Thrifty Member
posted: Nov. 17, 2009 @ 12:27p
SecondGunman said: I'm with a startup company. When I say startup, I mean it's the two owners and me. How about you pay for your weekends in exchange for some equity in the company?
I don't know why this got so much red, since it's actually the law. For the state I live in and the states I travelled to and worked in most last year, it's definitely the way income tax is meant to work.
Whether it's the way most people who travel heavily for business actually deal with their taxes, that is probably another story!
However, it's been known to be enforced, like the poster's story above (his dad was pressed by NY state for pro-rated income tax since he worked a month there).
When I was looking this up last year, I noticed that there was even a special information booklet by the IRS for travelling nurses, who apparently do very short stints in many states - ? I don't know - there may be other such published information.
jeremyn said: You actually need to file income taxes in every state in which you do work. You will need to keep track of how much time you spend in each state and pro-rate your salary.
couponhed
Senior Member
posted: Nov. 17, 2009 @ 10:56p
SecondGunman said: My apologies if this has been posted before. I looked around and didn't see anything that looked similar. This is a bit complicated, but here's the short version:
My wife and I separated back in August. Shortly after, I took a new job that involves lots and lots of travel. The original plan was for me to have a base of operations somewhere and to be on the road four or five days a week. The reality of things, though, is that I'm on the road constantly. When I say constantly, I mean that I've spent one night since August 1st NOT in a hotel. This is seriously throwing off the travel budget that my boss and I came up with a few months ago and this can't last forever. Here are my questions:
I'm thinking a fair split of expenses/travel budget would be for my company to cover my hotel rooms, since I'm on the road in a different city every week, and for me to pay for food, since I'd have to eat anyway. Do you think that's reasonable?
Is it fair for me to expect my company to cover hotel rooms on the weekend? I could go to a friend's place or my mother's place on weekends, but that would require a round-trip plane ticket every weekend to the tune of at least $200. If I did that, I would fully expect my company to pay for the plane ticket. That's what they would do if I were traveling three or four days a week from my home, so I don't think it unreasonable to expect the same if I'm on the road Monday through Friday. Right?
I am, for all intents and purposes, homeless. My things are in a storage unit in California, and I have no intention of moving back to California. At this point, I can "live" anywhere I want to. I think I'm going to use my mother's address as my "residence". That gives me a mailing address in Arkansas, which has a reasonable income tax, and a rent-free place to crash on the rare occasion I'm not on the road. Should I consider a state with no income tax? I'd rather not disclose my salary if I can avoid it, but take my word for it when I say that saving the 7% income tax from AR by moving to a 0% state would not be enough to pay rent at a reasonable place (In my mind, $500 will get you a reasonable place in most parts of the country. That means a salary of ~$87k before it becomes an issue). Currently, I have personal possessions in Arkansas, Colorado, and California. I believe that means I can claim residency in any of those three states for tax purposes. Is that right?
My boss is tossing around the idea of us deciding on a resonable dollar value for expenses each week and raising my salary by that much. That would leave all decisions about lodging and food to me. That would also raise me from the 25% to the 28% tax bracket federally. Are there any advantages or disadvantages to this that I may not think of?
On a side note......as I, mentioned that my wife and I split up. She's sending the divorce papers to me next week. We're filing a joint petition for summary dissolution of marriage in California. As I understand it, this takes several months once the paperwork is started. The date the marriage ends is the date the final paperwork is complete, right? My question is, we would still benefit from filing 2009 taxes as married, right? If there is a significant advantage to waiting a month, I can probably convince her to wait.
1. The business that you are working for should pay for food while you are "on the road". Being on travel requires you to eat out all the time, eating out is expensive (~4-5x the cost of a home-cooked meal).
2. You should be reimbursed separate from your salary. Employment-related deductions are subject to a floor of 2% of your AGI. If you have a salary that produces an AGI of 100k and 10k of travel expenses, you will pay tax on the first 2k if the company simply increases your salary by 2k to cover.
3. A higher salary may be an alimony magnet. I presume that your wife is filing in California for the favorable treatment that it gives female former spouses in divorce proceedings. What state were you married in? What state did you live in for the majority of the marriage? The end of the marriage? You should talk to a lawyer about forcing the proceedings to be moved there.
Edit: Its not entirely clear what state you lived in before. AR, CO or CA? If CA was your home when you lived as a couple, you should divorce in CA. If its a game to get more money, you should get the proceedings moved to the place that was your home when you were a couple.
aeiouy
Senior Member - 1K
posted: Nov. 17, 2009 @ 11:17p
Since it is a small start up company, it sounds like the two owners need some guidance in terms of structuring this.
As others have pointed out, it doesn't make sense in most cases for the business to not pay the expenses. It says them on taxes from dollar 1, and they also don't have to pay half the income related taxes required by increasing your salary.
I am not sure why they are trying to do it this way, so I suspect it is simply out of ignorance. I would ask them to specifically talk to their accountant about this and make sure they are doing what works out best for everyone involved. Right now the plan seems like it works out worst for everyone involved.
aeiouy
Senior Member - 1K
posted: Nov. 17, 2009 @ 11:22p
NantucketSunrise said: I don't know why this got so much red, since it's actually the law. For the state I live in and the states I travelled to and worked in most last year, it's definitely the way income tax is meant to work.
Whether it's the way most people who travel heavily for business actually deal with their taxes, that is probably another story!
However, it's been known to be enforced, like the poster's story above (his dad was pressed by NY state for pro-rated income tax since he worked a month there).
When I was looking this up last year, I noticed that there was even a special information booklet by the IRS for travelling nurses, who apparently do very short stints in many states - ? I don't know - there may be other such published information.
jeremyn said: You actually need to file income taxes in every state in which you do work. You will need to keep track of how much time you spend in each state and pro-rate your salary.
But I assume this guy is some sort of salesmen. People who go on business trips to various states don't pay taxes based on that. If I went to a convention for a week in NY I would not pay a week's income tax to New York.
I don't know how Sales transactions are such are handled, but I would assume that governs how that works, and I doubt it is the same thing as a traveling nurse which is actually a full formed business.
A sales person flying in is just coming in for a meeting and a discussion.
I also don't know how consultants would deal with this... but I am going to ask my brother as he has been a consultant for the last 14 years, and spends a lot of time on the road.
As for weekends, just work something out. As others mentioned bigger companies have deals where they will fly you back or else fly out a spouse for the weekend etc and pay for the lodging etc. In this case, and because of your circumstances, I don't think it is unreasonable for them to pick up the lodging on the weekends and then you get your own food etc.
Just try to work in some ownership of the company and such as part of all this. If you believe in this company, it won't hurt to sacrifice a little bit now for potentially greater reward later on.
Ok, it sounds much less nefarious than when I first replied. As others have indicated, it will be cheaper for both yourself and the company to have any expenses reimbursed, rather than added as salary. If full reimbursement is not possible, then just figure out what rate of reimbursement is fair, and apply that. As far as figuring out what should and shouldn't be reimbursed, that's a bit harder. My examples wouldn't necessarily help you, since my expenses are reimbursed by my companies clients, rather than from my company itself. Good luck in either case.
Here are answers to a few questions that people have asked:
My wife and I were married in Arkansas. My family is there, her family is in Alabama, and we got married in the middle. We lived in California for the entire marriage. I moved to Colorado when we split up and I "lived" there for two months while helping to get the new company started.
My company is based in Colorado and all purchases are done through that office. I'm a salesman, and as has been said, I basically just travel around and meet with customers. I DO NOT sell any actual product myself. The products are warehoused in Colorado and they stay there until they are sold and shipped to the customer. All transactions are done by phone through the home office or on our website. It's my understanding that this is the deciding factor on whether I need to pay income tax in each location where I work. If I were carrying a box of lollipops around with me and selling them door-to-door in each state, then the company would be generating income in each state (thanks to me) and the company would need to pay taxes to each state. Further, they would have to separate how much income they generate in each state and would have to give me a W-2 for each state. Because we sell all products from our warehouse in Colorado and ship them all from Colorado, we can avoid that headache. At least, that's what I'm told. I am but a chemist and not very knowledgeable in these things.......
The idea of raising my salary and letting me cover some expenses was brought up by my boss during one of our late night phone calls. We frequently work until midnight and are on and off the phone with each other until then. He mentioned this late one night and he may not have thought it through completely before he did.
SecondGunman said: The fact that I don't really have a home also makes this a pretty unique situation. Normally, I'd work Monday through Friday and go home on weekends, with the company paying for airfare.Your situation isn't unique at all. Your divorce and homeless status has nothing to do with appropriate reimbursement of business-related travel expenses. Your employer should be reimbursing you for getting you to and from your work locations and expenses incurred while there. Any deviations from that (weekend travel to a city other than your home, staying over a weekend at the work location, etc.) could be reimbursed at the lesser of the authorized or incurred.
You are giving your boss way too much information. If you are "moving" to Arkansas following your divorce, then the rest of the information is really nobody's business. If your employer approves reimbursement based on your domicile there, then that becomes the baseline for any alternative reimbursement.
Being a start up, I guess the company isn't making money yet. Therefore eligible expenses are not valuable when it comes to taxes. So the company is trying to minimize total expenses.
The company should be thankful that they found someone willing to travel nonstop and not "go home" on a weekend. They should be covering you fully for air/local travel, hotel, and a fair per-diem rate. If their business model can't shoulder this expense, that's their problem - why should you subsidize their poor management?
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