[NonProfit_Emplo]

My employer recently sent me an email saying

"It has recently come to our attention that immigration legal fees paid by the employer are considered taxable income to the employee. Generally speaking, the IRS considers immigration fees paid by an employer as a taxable fringe benefit to the employee.

Therefore, based on advice from our Corporate Tax department, Payroll will be including any immigration fees that were paid on your behalf by the firm as taxable income on your paycheck. The fees will appear under the Earnings section of your pay-stub as M3 FRINGE."


These fees include:
Lawyer fees: $800.00
USCIS filing fees (Form I-129): $320.00
USCIS Anti Fraud Fee: $500.00
Overnight courier: $36.00
USCIS Filing Fee for I-907 (Premium Processing Fee): $1000.00


My question then is, do I have incur all of this as taxable income? The total amount is $2656 and the corresponding tax on it i.e. approx $700 will have to be paid by me. Is that correct or is there any documentation to refute these?

Thanks a lot for taking a look at this.

[AtlantaTaxExpert]

The interpretation that the fees are taxable income to you is accurate. The IRS does consider such fees to be part of your compensation and is therefore taxable.

[russ_ashman]

Not In agreement.
US Tax Guides for Foreign Persons and Those Who Pay them.
US Taxation of H1B Specialty Workers
By Paula N Singer, Esq.
Page 39.

Immigration processing fees and attorney fees for obtaining nonimmigrant status authorizing employment, such as H-1B Specialty Worker status, are ordinary and necessary expenses of the business because the petition is the responsibility of the employer, not the employee. Such fees are not includable in the employee's income.

Whether other immigration processing fees and attorney's fees are excludable from income depends on whether, under the facts, the expenses are a deductible business expense of the employee. If so, then the expenses would be excludable from income as a working condition fringe benefit. If not, the expenses are includable as wages. For example, fees in support of US Lawful permanent residency status for employees nearing the end of the maximum time of their nonimmigrant status are deductible business expenses if the employer requires the services of the employee to continue. Fees related to family members are personal and not deductible.

Basically, fees tied directly to the employment for the employee are not included as taxable wages.
However, any fees tied to the employee's extended family would be taxable wages [becasue those are the employee's responsibility not the businesses even if the business chooses to pay them].

[MukatA]

H1-B is filed by employer so the expenses must be met by the employer. It is not your income.

[kusuma7884]

I am in a similar situation of paying my H1 Expenses as NonProfit_Emplo. I am changing my employer and my previous employer wants me to pay all the H1 expenses ($3145). As of now, I do not have any in-detail expenses list.
My question is: If this amount is taxable, then should it reflect in W2 or should I have a document of expenses from my previous employer? Or Should I have an email from my employer statying that I am paying the H1 expenses out of my pocket?

[russ_ashman]

1st. If repayment wasn't originally negotiated, I would refuse to repay.

2nd. Current year W2 should not be modified unless the H1B expenses are for 2011 AND are part of W2 income.

3rd. Now we need more details:
Was any portion of the repayment for amounts that were included in prior year W2?

If yes, we are repaying prior year W2 wages,
W2C for prior year should be issued adjusting WAGES in box 3/5 and taxes for boxes 4/6 [Box 1 wages are box 2 taxes are not adjusted in this situation. EE needs to claim misc. business deduction on 2011 personal tax filings.]

Employer should give EE itemized receipt for repayment, w2c, and pay EE box 4/6 tax delta difference.

If no, not repaying prior year W2 wages,
Then just the receipt of repayment. Seek tax assistance as necessary to claim repayment as tax deduction on 2011 personal taxes.

[kusuma7884]

Thank you for the comments, That is really helpful.
I was told initailly that I have to pay the H1 B expenses if I change the employer. So No repayments was originally negotiated. The H1B was filed in Feb 2011. No portions of repayment were included in prior W2.

Can an employer make H1B expenses as a part of W2 income? If he refuses, can they give me a repayment receit, and I can seek a tax assistant and claim the expenses.