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Housing taxable question

A couple questions:
We have a couple employees that will be doing a research internship. The stipend for the internship covers wages and housing. It is all run through Payroll. We will prepay for their housing, and deduct the housing from their pay.

  1. Would the housing portion of the stipend be considered supplemental wages?
  2. Do you see any issues with deducting the prepaid housing from their pay? I plan on giving them two pay entries, one for wages, one for housing (supplemental wages?), with a deduction for housing.
  3. Would I show the housing anywhere other than wages on their W-2?

-John

Comments

  • Two unrelated issues.

    • If IRS considers this person to be an intern, then no work as in NO WORK is being done. There are more to the rules then that but that is the first place IRS will look. The intern rules are very clear the any work done must be incidental (pretty much unrelated to the internship.
    • There are housing rules. With few exceptions, housing is taxable. A manager of a housing complex whose job requires them to be on site 24/7 could maybe be non-taxable, but by definition such a person would not be an intern. A big apartment complex could probably discount the apartments 15% under the discount rule.
    • As far as the W2 is concerned a housing allowance is vanilla payroll wages at time of constructive receipt.
  • agree with David on all points.

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