Taxable income question.

[sourceninja]

I know a guy who just got offered a job where he is not paid salary, but instead is allowed to live with his family in a house owned by the company for free.

Basically they live on his wife's income and his "job" covers the house and utilities.

My question is, does this count as income and will he need to claim it on his taxes?

 

[sixone]

I would tell your friend to be VERY careful about this. No benefits at all, especially no workers' comp coverage, in case he's injured on the job. That makes me think that whoever is offering this job is trying to keep it under the table. I would have a hard time trusting someone like that.

I'm not an accountant, but I would bet that housing qualifies as a taxable benefit.

 

[sourceninja]

I would tell your friend to be VERY careful about this. No benefits at all, especially no workers' comp coverage, in case he's injured on the job. That makes me think that whoever is offering this job is trying to keep it under the table. I would have a hard time trusting someone like that.

I'm not an accountant, but I would bet that housing qualifies as a taxable benefit.

Oh yea, I already told him I thought it was silly. The average house payment in our area is about $1100 a month for 2500sq feet. Average utilities put that around 1400 a month (total with rent/mortgage).

So basically he's getting horrible compensation ($16k a year) that just looks good on the surface. He could make more at walmart.

 

[Red Squirrel]

I'd be very weary of not being able to actually own my own house. What if he changes jobs or gets laid off? Also, knowing how weird the states can be with tax stuff my guess is it probably does count as income, meaning he probably has to pay some ridiculous amount of taxes each year on it or something. Probably more money than if he owned it and he was just paying the mortgage. Kind of like when you win a large prize on a game show you have to pay like half it's worth in taxes on it.

 

[Mark R]

It sounds like the employer is trying to launder money or evade taxes. Your friend would also potentially be guilty of tax evasion, unless he listed the rent and utilities on the tax return, and cut a check for the amount of tax owing.

 

[jaedaliu]

It sounds like the employer is trying to launder money or evade taxes. Your friend would also potentially be guilty of tax evasion, unless he listed the rent and utilities on the tax return, and cut a check for the amount of tax owing.

I would think that the friend is getting expenses for himself and family while working, so there should be no taxes owed. The GSA rate is going to be way more than $1400/month.

However, as he isn't drawing a salary at all, I don't see how he's an employee. Is he getting a W2? a 1099? anything? Probably not because he's not getting any money.

He's fine, but he should probably look for a real job.

 

[CPA]

Did your friend get hired or did he get brought in as a consultant?

 

[CPA]

I would think that the friend is getting expenses for himself and family while working, so there should be no taxes owed. The GSA rate is going to be way more than $1400/month.

However, as he isn't drawing a salary at all, I don't see how he's an employee. Is he getting a W2? a 1099? anything? Probably not because he's not getting any money.

He's fine, but he should probably look for a real job.

You don't need to draw a salary to be an employee. Lee Iacocca ran Chrysler for $1 a year back in the 80's. He was still an employee. If you receive any form of compensation and the company has direct supervision of you, then the IRS would normally deem that an employee/employer relationship.

 

[AustinInDallas]

1099 or w2?

 

[HardcoreRobot]

1099 or w2?

or 'rent & utilities' by the sounds of it

 

[purbeast0]

lol that sounds like a very low paying job unless he lives in a really rich neighborhood.

 

[AustinInDallas]

is this like a ground keeper position or something?

 

[sourceninja]

is this like a ground keeper position or something?

Nope.

The guy used to run his own consulting business but wasn't making ends meet. So he found this guy who runs some kind of business that needs his services and they decided to barter this silly solution.

I don't have too many details, but it just seemed like he's in for a tax shock to me. This house is just some house the owner of the company owns and is putting in the companies name to let him live in it.

 

[CPA]

Nope.

The guy used to run his own consulting business but wasn't making ends meet. So he found this guy who runs some kind of business that needs his services and they decided to barter this silly solution.

I don't have too many details, but it just seemed like he's in for a tax shock to me. This house is just some house the owner of the company owns and is putting in the companies name to let him live in it.

The owner is obviously using this as a tax write-off to the companies revenues without the incursion of employer paid payroll taxes, and hoping no one at the IRS catches it.

Your friend will have to report the value of the imputed rent as 1099 income if he is providing services. Of course, then he can deduct job related expenses against that imputed income.