[AussieWayne]

Hi all,

I am faced with a big dilemma and I would appreciate any kind of help. I am an Australian citizen and I have been offered a L1B Visa (inter company transfer) for one year to work in OH in 2008.

Now the dilemma is that I need to structure my pay to minimize the US tax that I pay. The company has offered a set amount of money to pay for the rent and utilities and a per diem of $40.00 for the period of stay in addition to my base salary.

The question is, would it be better to get the rent and utilities payment as per diem also ? I understand that the max per diem for OH is around the $158.00 (which will be under the amount that I will be paid if I was to join the rent and utilities pay to my original per diem). If so, is it possible to get a per diem for the whole year? (As some people suggested to me that I can only claim a per diem for a max of 180 days in my situation after which the per diem will be considered as part of my salary). And if I can get the rent and utilities payment included as a per diem for the whole year, does that mean that I will be only be paying taxes on my base salary which will be paid from our US office.

Also, If I can only claim per diem for a limited period, is there another way that I can minimize my tax? Knowing for a fact that the money that I will be paid for rent and utilities will exceed what I will actually incur!

Thanking you in anticipation….

[MukatA]

Your wages and all other allowances will be included in your income. Any payment for rent and utilities will be included in you income (on your W2). It is better that you check with your employer.

Only things you can deduct is Moving Expenses, which includes expenses while hunting for accommodation. For this information, refer to the IRS Form 3903 Instructions and Publication 521, Moving Expenses. Moving expenses are deducted as adjustment to your income.

You may be able to claim a part of your rent and utilities if you have a fixed part of your home (accommodation) only for your office work and that is required for your job (by your employer). These expenses can be deducted only if you itemize your deductions (and only the expenses that are more than 2% of your AGI).

[AtlantaTaxExpert]

If Wayne times the transfer to be LESS than one year, then he CAN deduct the daily per diem as an itemized deduction using Form 2106 and being subject to the 2% AGI floor. That will partially offset what he gets in per diem reimbursement, which, as noted by MukatA, IS subject to income tax because, because, as a set amount given per day, it is under a NON-accountable plan.

If he stays for MORE than one year, the per diem deduction is NOT available to him, because the IRS will not consider his stay to be of a temporary nature.

Now, if he submits an monthly expense report for his food and lodging and gets reimbursed based on that report, he is under an accountable plan, in which case the reimbursement is NOT subject to income taxes. He loses the per diem deduction, but will come out better in the long run because of the restrictions associated with the 2% AGI floor always reduces the offset somewhat.

[AussieWayne]

Now, if he submits an monthly expense report for his food and lodging and gets reimbursed based on that report, he is under an accountable plan, in which case the reimbursement is NOT subject to income taxes. He loses the per diem deduction, but will come out better in the long run because of the restrictions associated with the 2% AGI floor always reduces the offset somewhat.

Thank you guys for the answers. In regards to the monthly expense report does it have to be supported every month by receipts for the rent, utilities and food etc..

[AtlantaTaxExpert]

Aussie:

If your company does not require the receipts, then, no, they are not required. The IRS normally accepts the expense report at face value.