Hello Tax Experts,

I have many un answered questions. Any help by answering them is highly appreciated.


1) I am full time for a consulting company A (I get 5 day leave, 5 sick leave and paid for US holidays only 6 days, and 50% of the medical benefits for family ). And this company counts 2080 as number of hours working per Year

My wife is not a fulltime for the company and she doesn't get any benefits (no holiday , no vacation and no pay for US holidays) they count 1880 as number of hours.

My question is : when both of us salary is $65K per anomy she gets $65000/1880 = $34.57 /hr and I get $65000/ 2080 = $31.25 /hr and this makes lot of difference in the pay stubs.

Now how can I justify about this to the company and why these people are counting 2080 as number of hours? (I understand that I am getting benefits and my wife doesn't)


2) Whatever gross we make, for ex: if we both work for 21 days in a month we get:


Me : 21 * 8 * 31.25 = $ 5250 (Gross) ---> tax these people charge 29% of the Tax (Tax = $1522.5 ) = I get $3727.5
My wife : 21 * 8 * 34.57 = $ 5807.76 (Gross) --> these people charge 21% of the Tax ( Tax = $ 1219.62) = She gets $4588.13

Now my question is why my consulting company is charging 29% as TAX and why my wife's consulting company is charging only 21%?? How can I find out more details what exactly we pay as taxes ?


3) Which is better to take as a salary in both of the cases (me and my wife)?

$65000 K per annum OR $50000 K per annum and $15000 as expenses?


Will it be a problem if we take some of our salary as expense? Please explain?

Jingi1234:

1) Apparently, the company has a policy of no benefits to part-time employees, which is what your wife is (full-time is 2080 hours per year). Now, you work 260 8-hour days, and your wife works 235 8-hour days. She gets no benefits, but has a higher hourly salary. Seems to be a reasonable trade-off.

2) The amount withheld is irrelevant and is driven by how many exemptions you claimed on the W-4. Just make sure there is enough withheld to pay all of your tax liability when you file your tax return next year.

3) Now, if you can document the expense to the company and get reimbursed for those documented expenses (an accountable plan), then it is best to get the reimbursement, because such reimbursement for documented expenses is NOT taxable. However, if you get paid per diem (so much per day for expenses with no requirement for documentation; this is an non-accountable plan), then the per diem IS taxable and is treated as salary.

3) Now, if you can document the expense to the company and get reimbursed for those documented expenses...

What exactly we can show as expense?

Can you we show Rent (or mortgage) / Car monthly payment / GAS/ TOLL / PATH train expense / Food? Please give the list of things that we can show and get reimburse? (We already have an agreement with employer but that guy never gives any list of things that we can show?)

Please help.

Thanks

Jing1234:

Expense reporting can be considered an art. What is a valid expense in one industry is not valid in another.

Your monthly rent and/or mortgage payment is not normally considered a business expense unless you use your house/apartment extensively in your line of work. Even then, the expense is limited to a specific area of the house used exclusively for work.

Food is not normally a reimburseable expense in day-to-day activities (you go yo work, perform your daily duties, then go home) unless you are entertaining clients at lunch. However, when you travel for the company, your meals while traveling are reimburseable.

Tolls and gas are normally NOT reimburseable if you are commuting to and from work. However, they are reimburseable if you are using your personal vehicle to travel while on company business.

Certain mass transit expenses are eligible for tax-free disbursements from your company as a means to get people to use mass transit instead of driving in their cars.

Now, as for your agreement with your employer, if he will not give you specific guidance as to what is or is not reimburseable, then claim EVERYTHING and have him deny the items that he considers non-reimburseable.