[deepali2310]

Hi, for a L1B employee who gets paid in India in INR salary and also gets US allowances in the US, stays less than 11 months in the US, should the W2 reflect only the INR salary in USD on the W2 ?

It is also true that if he stays more than 11 months in the US, then the W2 should reflect the INR ( converted to USD) + USD allowances on the W2 ?

[AtlantaTaxExpert]

The W-2 should reflect the income earned while in the U.S. whether you get paid in the U.S. or in India.

As for the taxation of your daily living allowance, the cut-off is 365 days (12 months).

If the stay is LESS than one year, the daily living allowances is tax-free, but you must factor that allowance into your calculations if you claim your daily living costs on your U.S. tax return using Form 2106.

[deepali2310]

Thank you, that helps. So, in my case, when I stayed 11 months on L1 B visa, my employer provided pay stubs in the US, but that had the salary that was paid in India converted to USD. These pay stubs did not include the US allowances, probably because, as you said, its tax free. Is that a fair thing to do ?

However, when my stay exceeded 11 months, the salary stubs started included India + US alllowances.

I did not claim any living costs.

[AtlantaTaxExpert]

Yes, that IS a fair thing to do. The living allowance is designed to reimburse you for your costs on a TEMPORARY job assignment.

However, the IRS considers ONE YEAR to be the limit for a temporary job, which is why the living allowance became taxable compensation when the one year mark was hit.