Tax laws

Understand tax laws and employee benefits


The 1980 film “Airplane! Featured struggling ex-fighter pilot Ted Striker, forced into the cockpit to land a commercial airliner.

This was a comedic take on older movies where panicked passengers are asked if anyone on board knows how to land the plane.

A more common theatrical plea for expertise, “Is there a doctor in the house?” always met the practical doc who handled the emergency.

Most people don’t know how to land an airliner or meet the needs of a patient with a medical emergency away from a healthcare facility. But I think we can all understand the importance of the problem.

Experts clearly know more about their areas of expertise than a layman. This extends to plumbers, cable TV technicians, auto service technicians and tax advisers. This does not mean that the layman cannot sense that something is wrong.

The tax law provides that “gross income” includes income from any source. In the late 1970s, the IRS became increasingly concerned that employers were making their own “rules” about when benefits were taxable.

Airlines offering free or discounted travel, hotels offering free or discounted rooms, retail stores offering discounts and others decided for themselves whether or to what extent a benefit was taxable income. for the beneficiary employee.

In 1984, Congress acted to clean up the taxation of employee benefits. First, the law made it clear that any benefit was taxable unless the law said it was not. Second, the law expanded the list of items excluded from income by law.

The purpose of the 1984 changes was to make it clear to tax advisers what taxable income is. Some confusion remains, but for minor dollar amounts.

How many free meals can be offered before the employer has to declare the income? How important can a Christmas present be before it becomes taxable? Limited confusion remains for such articles.

I have no personal knowledge of what the Trump organization has done with its benefits package.

If the facts reported in a recent indictment are true, the tax law has been violated. Maybe not. No, “Well the tax laws are too complicated”.

This household doctor can later tell that the patient has suffered a myocardial infarction with ST segment elevation. Ordinary people just saw that something was wrong with his heart.

The tax advisor could use “code sections” to explain the taxability of the benefits. Ordinary people should at least notice something strange with the business arrangement.

A man lies unconscious on the floor of a restaurant. A passenger notices that the plane’s engine is on fire. Do we need to understand the cause of either emergency to know there is a problem?

Many say it is a political coup. If the facts of the indictment are true, this conclusion is only valid if the obvious fraud is too weak to prosecute. A media blitz claims this is all about the use of a company car.

It’s not. There are two company cars. A luxury apartment with paid furniture and utilities. Private school lessons. Income paid as an independent contractor to support pension contributions. Hide income from city and state income taxes.

Let’s say you land a great job paying $ 300,000 a year. The employer gives you and your spouse cars. They pay your mortgage, taxes, insurance and utilities. For private lessons for your children.

A schedule is prepared showing that the various personal expenses total $ 123,000. The employer “reduces” your salary to $ 177,000. Your W-2 form earns $ 177,000 in salary. You pay tax on $ 177,000. The employer deducts $ 300,000.

You are not a tax expert. But do you see a burning engine? An unconscious body on the ground? Should the authorities view the problem as too small to elicit a reaction?

There is a history of going after well-known people for tax evasion. Léona Helmsley. Wesley Snipes. Yes, even “The Situation” from Jersey Shore. No political moves. Just an effective way to scare ordinary people.

You can agree or disagree with my point of view on this point. Not because the tax issue is too complicated. When is a body or a fire too small to react?

James R. Hamill is the Director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at [email protected]


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